How should we deal with other people? Should we always be honest and trusting? Should we screw people over whenever we get the opportunity? We can treat this as a problem of morality, but unfortunately it won’t get us very far. Our finer feelings would say that deliberately hurting others is abhorrent (if we don’t have psychopathic tendencies that is), but what do we do when someone screws us over? Do we continue to behave in a manner we consider to be morally correct, or do we seek revenge? So the problem is still unresolved.
This problem has been solved believe it or not, by the use of game theory. Reason comes to the rescue once again. A competition was held a decade or so ago to find the best strategy for dealing with other people when a degree of trust was required. A simple problem was posed. You have to deliver goods to a location known to you and the person buying the goods, and they in turn have to leave the money in another location known to both of you. These locations were far enough apart that there was no visual checking possible since you or the buyer of your goods could cheat. You may leave the goods, but the buyer may fail to leave the cash. Or you might simply go to collect the cash without leaving the goods. The situation was designed so that either, or both could cheat and get away with it. You could leave the goods but on arriving at the drop off point for the money find nothing there. Same for the buyer – leaving the money and then arriving at the drop off point for the goods and finding nothing.
People who eat equations for breakfast entered this competition and created thousands of competing strategies. The aim was to find the best strategy when the game was repeated over and over. Was it best never to leave the goods and always screw the buyer, or was is best to always leave the goods? Each player would learn the behavior of the other, and modify their own behavior accordingly. So if you never left the goods, the buyer might learn very quickly that there was no point entering into a transaction with you. The net result would be that you sold almost nothing, because the buyer would leave the game.
To cut a very long story short, and after the creation of strategies that could be barely understood by the people who created them, a very simple solution was found. It was called tit-for-tat. If your trading partner cheated then you cheated on the next transaction, but only on the next transaction. This meant that if your partner always cheated you would get screwed over once, but never again, and the partner would only transact once. If your partner never cheated then every transaction would be successful, and the aim of the game was to maximize gain.
So there you have it. When dealing with people in a situation where trust is needed, we should trust. If we are screwed over, we cheat in our next transaction with them. This disarmingly simple strategy beat all the others. Tit-for-tat is the way to live a life – in previous times it was called eye-for-an-eye.