Our political discourse is dominated by a conflict between public and private, collective and individual.  It is easy to see why the individual side of the debate seems attractive: after all, who doesn’t want to be left alone to pursue his or her own interests free from interference?  By contrast, public and collective institutions—including even democratic politics itself—can appear corrupt and inefficient.  Even more fundamentally, they inevitably restrict choice: e.g., minimum wage laws restrict the freedom of workers to sell (and employers to buy) labour at a price of their choice.  So why do we bother with collective institutions at all?  Why don’t we leave all of our affairs up to individual choice? 

Perhaps surprisingly, there are purely self-interested reasons for people to allow their freedom of choice to be restricted.  As has been recognized at least since Thomas Hobbes’s time, even perfectly rational and fully informed agents are not guaranteed to achieve good outcomes by individual choice.  The classic illustration of this point—arguably present in Hobbes’s Leviathan, but made famous in the 1950’s due to the growing influence of game theory—is the Prisoner’s Dilemma, which runs as follows.  Suppose that A and B committed a crime together, for which they have now been arrested.  The prosecutor is prepared to cut a deal with them.  So she says to each: “You have a chance to confess.  If you confess and your partner does not, then you will free and he will be convicted of all charges, for a total of 10 years in prison.  If both of you confess, then we do not need your testimony to convict your partner, but we will reward your cooperation with a lighter sentence: you will get 5 years.  If both of you stay silent, then we will only be able to convict you on a less serious charge, and you will get 3 years.”  Each prisoner is offered the same choice, but they are not allowed to communicate with each other.  How should they choose?

A and B’s choices and outcomes

Take A’s point of view.  He reasons: “B will either confess or stay silent.  If B stays silent, then I had better confess, so I can go free.  If B confesses, then I had better confess too, for otherwise I face 10 years in prison.  In other words, no matter what B does, my best choice is to confess.  So I will confess.”  If B is smart, then of course he reasons in an exactly symmetrical way.  So they both confess, and get 5 years in prison each.  But neither is likely to be happy with this outcome: in particular, they both realize that if they had both stayed silent, they would have received a shorter sentence of 3 years each.

Consider again the example of minimum wage laws.  Suppose I am young and unemployed.  Wouldn’t it be easier for me to find work if I were allowed to offer my services for less than the legally mandated minimum?

While A and B both choose as rationally as they possibly could, and with perfect information, they nevertheless end up being worse off, even from a self-interested point of view, than they could be.  The Prisoner’s Dilemma, then, shows that even fully rational and perfectly informed individual choice is not guaranteed to get you the best available outcomes.  It would have been better for our prisoners to have made a prior agreement to stay silent, along with a way to enforce that agreement—thereby restricting their own freedom to choose.

The structure of the Prisoner’s Dilemma, of course, is not confined to prison settings. Similar issues are likely to arise whenever the outcome of your choices depends, in part, on my choices.  This, of course, is how things are most of the time in any social setting.  This is why philosophers such as Thomas Hobbes, and more recently David Gauthier, put it at the center of their social contract theories. Tom Slee's book No One Makes You Shop At Wal-Mart considers applications of the prisoner's dilemma in various contemporary contexts.

Consider again the example of minimum wage laws.  Suppose I am young and unemployed.  Wouldn’t it be easier for me to find work if I were allowed to offer my services for less than the legally mandated minimum?  So why would I, rationally, accept this restriction on my freedom of choice?

The answer, of course, is that unemployed people competing for scarce low-wage jobs face a Prisoner’s Dilemma.  If Ioffer to work for less and you do not, then I will get the job and you will miss out.  Knowing this, however, you will offer to work for less as well.  In the end, neither of us manages to get an advantage over the other.  All we have succeeded in doing is lower the wage our prospective employer will pay whoever ends up with the job.