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James Brody June 14th, 2011 03:53 PM

Tit for Tat, Business, and Our Government
Honesty is a winning strategy only in extended relationships. Otherwise, the dollars go to the one who cheats and leaves town. This has been the finding of researchers for the last fifty years and today is the likely barrier to economic recovery…we know (damn) good and well that this government will cheat us at every opportunity and we refuse to form partnerships it. We know (damn) good and well that this government will cheat us at every opportunity and we refuse to form partnerships with it.

“…Consider two uncertain situations. In the first, our business is waiting to find out the location decision for a customer's new industrial plant, so we know where to build our new supply facility. Until this is resolved, we will not invest in building nor will we hire staff. In the second situation, we know we are in for some pain, someone is going to make our business less productive and profitable, but we do not yet know how much. Planning is marginally more difficult, but the main reason we will not grow in the second situation is that investment is less attractive regardless of the precise resolution of uncertainty.

“In the first case, uncertainty is the obstacle. Once it is resolved, we invest. In the second case, uncertainty is a small part of the problem. The large part is simply that bad things are happening. The day we are told "well, it's exactly a 30% hit to productivity and profits," all uncertainty is resolved—yet we will still not invest or hire.

“The Obama administration's economic policies have defenders. For instance, New York Times columnist Paul Krugman will tell you the stimulus helped, and we didn't have enough. I disagree. I will tell you the stimulus was wasteful and politicized, and the American people, not being idiots, know they will have to pay for it eventually. (emph added, jb) People adjust their plans to account for the additional debt heaped on them, meaning lower investment and consumption…”

Poundstone, W. (1992) Prisoner’s Dilemma: John von Neumann, Game Theory, and the Puzzle of the Bomb. NY: Anchor.

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