I first learned of the prisoner's dilemma in an economics class my freshman year. For those who missed out or forgot, it goes like this: Two criminals are arrested, suspected of collaborating on the same crime. Since the authorities don't have sufficient proof, they isolate the prisoners in separate cells and offer them the same deal: "If neither of you talk, we'll keep you for couple days but then we'll have to let you go" they say. "If both of you talk, we'll convict you both, but we'll soften your sentence for cooperating," they continue. But, "if one of you rats out the other, the snitch can go free while the other rots."
Isolated in his cell, one of the prisoners thinks it over: If the other guy talks, then I better talk too so I can get a softer sentence, he deduces, and if the other guy plays dumb, then I should talk and walk free. The other prisoner has the exact same thoughts. Both snitch and both get sentenced to jail.
The outcome is surprising. Both prisoners make their best decision but don't get the best outcome. Ideally, neither of the prisoners would have talked and both would have been released, but that doesn't happen. It doesn't happen because they have the choice to snitch. It is this choice that undoes them. When it comes to choice, the prisoners would have preferred less. They would have preferred to restrict their freedom of choice.
The current debate about Wal-Mart brings the prisoner's dilemma to mind. The pro-Wal-Mart crowd claims consumer savings as mandate for dismal corporate practices. People are free to shop or not shop at Wal-Mart, they explain. Their choice of Wal-Mart over the competition amounts to stamp of approval for the company's business practices, which they claim are all in the name of low prices.
The Wal-Mart sympathizers frame the debate as a cultural war, with leftist activists on one side and price-minimizing consumers on the other. The activists - in the form of community, labor, and local business groups - reject Wal-Mart on the grounds that it breeds strip malls, depresses wages and bankrupts family businesses. The consumers, being rational cost-minimizers, flock to Wal-Mart because the lower prices are worth "those other costs." The activists are criticized for being "out of touch with America." If America did not like Wal-Mart then they wouldn't shop there.
That logic is faulty. Consumer behavior does not a mandate make. In fact, U.S. consumers may be similar to the prisoners, wishing there were fewer options. If U.S. consumers are rational price-minimizers then they know that if everyone else shops at Wal-Mart their individual purchasing decisions won't change a thing. They could convince their family, their friends, and their friend's friends to avoid the chain and they still wouldn't put a dent in the Walton bottom line. And if they can't change things then they might as well buy cheap and shop at Wal-Mart. On the other hand, if everyone else decides not to shop at Wal-Mart, then one individual's purchase, of say a TV with DVD player and surround sound system, can't single-handedly keep Sam Walton afloat. Again the rational price-minimizing consumer chooses to shop at Wal-Mart because as an individual his or her decision doesn't change a thing. Americans, whether they like Wal-Mart or not, shop at Wal-Mart, and the Walton fortune grows.
Freedom is a word that can legitimize most anything these days - from wars to protect our freedom, to tax cuts to free us from government, to Wal-Mart as freedom of consumer choice. Free-marketers expect the market to reward and punish, but they are mistaken. Individuals have no incentive to avoid Wal-Mart because their actions, in isolation, have no effect. It remains to activists, community groups, zoning boards and labor organizations to protest Wal-Mart. And when they do, they're not being paternal or exhibiting "we know what's best for you" elitism, they are addressing an issue the market is ill-equipped to address.
Neale Mahoney '05 is to Han Solo as Sam Walton is to Darth Vader.
