Friday, July 18, 2008

The Joker's Lesson on Free Trade

When I saw the midnight showing of The Dark Knight I doubt my fellow moviegoers were learning something about free trade. I didn't see the lesson at first but once I noticed it, it became painfully obvious.

***Spoiler Alert***

At the climax of the movie the Joker scares the population of Gotham to evacuate, leading to two ferries packed with people trying to escape the city. The Joker places a bomb on each ferry and then gives the two captains the detonation device for the other bomb. Ferry A can blow up Ferry B and vice versa. They have fifteen minutes to decide what to do or the Joker will blow them both up.

This is obviously a prisoner's dilemma game with the standard Nash equilibrium (the captains pull the triggers at the same time, killing each other). But that's not what happened. Each crew was overwhelming in favor of blowing the other up (confirmed by a vote), but no one was willing to actually do the deed. In other words, there's a very real morality cost that altered the payoffs. People would rather die than kill someone but they would rather have someone else kill than die.

If you look at polls Americans are mostly against free trade. (Last week's Economist cited only 33% of Americans think free trade is good for the economy.) Yet that's not how they act at the market. A choice between a cheap import and a more expensive domestic leads to people favoring the import. We don't of course need government action to limit free trade--people could just refuse to buy imports. But, as in the ferries, no one is willing to shoulder the cost of doing it themselves. They want someone else to do the deed.

Bryan Caplan
notes there's a big difference between voting and buying. In buying you internalize all the costs and benefits of your actions. In voting such considerations are externalized onto someone else. Your gut feelings of xenophobia, survival, or old ideas are a lot easier to hold on to. But when faced with the true costs of your action, revealed preferences are quite different than the cheap talk from a voting booth.


Anonymous said...

Hi, My name is Rory my mission (when bored and drunk) is to cyber-harrass all trekkies in the known blogosphere.
Star Trek is nonsense, the pseudo-science is rubbish, and Spock has no deep existential wisdom.
Live long, get a life and prosper.

dixieboy46 said...

I couldn't agree with you more on your observation about The Dark Knight. I immediately recognized the Prisoner's Dilemma, and while the Nash Equilibrium wasn't reached, the result is exactly what economists said it would be: most of the time, people will work together, and not try to exploit the other for greater gain.

Also, I noticed you cite Bryan Caplan...I heard a lecture from him just a few weeks ago on the Myth of the Rational Voter, and absolutely loved it.

Great post.