The Dollar Auction Game

Game Theory, Part I

Dec 28, 2021

On Saturday, June 23, 1973, the World Court condemned French nuclear tests in the Pacific. In what might be termed "gain of radiation" research, the U.S. and France had used scattered islands in the Pacific as grounds for experimentation with nuclear weapons since the closure of World War II. From those tests, Western culture gained the bikini. The Bikini Atoll got the shaft.

Laszlo Mero's classic, Moral Calculations (pdf here), is not the pinnacle of mathematical complication in the world of John von Neumann's game theory. But it is a masterpiece of illumination in the world of simple, if powerful applications of the tools of game theory. It lives perpetually near the top of my book recommendation list.

From Chapter 1:

In a game described by Martin Shubik a dollar bill is put up for sale. It is offered at auction with a minimum bid of one cent. Anybody who bids this much can take the dollar, provided, of course, that no one else offers more. The game proceeds according to the usual rules of auctions, but with one exception. The special rule is that the auctioneer must be paid not only by the highest bidder, but also by the second-higher bidder. The highest bidder pays what he bid and takes the dollar, while the second-highest bidder pays what he bid but gets nothing.

Shubik played the game at social gatherings, averaging $3.40 for the highest bid. But his profit was higher due to money received from the second-highest bidder. He would often introduce the game during a party when spirits were high, and minds a bit addled from libations. Large crowds were desirable for multiple reasons: finding players to get the ball rolling, the exhibitionist competitive instincts kicking in among some players, and the social pressure to pay up.

"My thirty cents has just been outbid. If I stop now, I might pay up for nothing…'THIRTY-TWO CENTS BID!"

Shubik and others running the dollar auction as an experiment took note of even married couples caught up in bidding wars that ramp past the dollar, where each participant no longer bids to win, but not to lose as much. Such couples were reported to have left parties in separate cars.

Ordinarily, we think of auctions as a form of price discovery, but there are many types of auctions. As many as we can imagine. And the structure of an auction determines everything. The dollar bill auction generates war out of nowhere.

Not quite out of nowhere. We might call it turnkey warfare. After all, the game doesn't always just turn a substantial profit. Try to play the game with two sharp old men at the local coffee shop and find yourself selling a dollar for a nickel or less. Play the game with sufficiently rivalrous mobs, and you might bankrupt at least one of them.

The Lysenkoist Government Auction

Ukrainian Trofin Lysenko climbed his way up the Soviet scientific establishment ladder by making promises of restoring food (crop) security that had declined due to the Soviet manipulation of the food market (they threw lots of farmers into gulags to be tortured, which doesn't stand out as the best incentive system in retrospect). His pseudoscientific theories were intellectually dismantled by knowledgeable Russian geneticists (also scientists worldwide and college kids with a little knowledge who were paying attention) who found themselves arrested, and often murdered. Stalin's promotion of Lysenko, and use of muscle to clear a path for his work, might have made his dismissal essentially impossible until the ascension of Nikita Khrushchev.

By that time, millions had died of starvation, including during the Holodomor in Ukraine, which happened under the watch of Lysenko's mentor, I.V. Michurin. Such failure won Michurin's theories of hybrid breeding elevated status–the only way to save face. After Michurin's death in 1935, Lysenko was his emboldened heir. The inevitable result is that Lysenko directed the Institute for Genetics of the Academy of Sciences of the U.S.S.R. for 25 years. Science stood still while nonsense failed its way to success as a prize for the performative act of supporting the state ideology during a time when unity meant more than practical gains.

Sounds like they were well into a dollar auction.

You're learning. Between the scientists and the pseudoscientific power mongers, giving up the game of virtue signaling in the direction of the brutal Stalinist mobs ended in overpayment for the value of the Soviet scientific institutions, which were sold out cheaply in the end.

All it took was one additional generation, and even the Soviet leader Boris Yeltsin was entirely unaware of what had been given up when he entered a grocery store in Texas and saw for his own eyes the value of honest science as applied to food production. After taking in the reality of what had been done to his people, Yeltsin broke down and cried.

Many sectors of the post-Soviet Russian economy still fight to make up decades of lost time. Institutional narcissism is a heavy burden to shed.

The Vaccine Games

What started with the strange tale of the pandemic of an easy to beat aerosolized virus has become a global battle over the onward march to eliminate the control group. The bidding began with a clash of the propagandized fear porn-driven narrative. The stakes were upped substantially over hydroxychloroquine and anything else that might treat patients before reaching a progressed disease state. Now that controversy over vaccine harms has ramped up substantially, two sides find themselves committed.

Vicious tribalism is in vogue, and the stakes could not be higher. One side wants the other to submit to a "my government can inject me with anything it likes, at any time" policy. The other has filed genocide and war crimes complaints in at the International Criminal Court.

When the end states of the game involve either of,

Rounding up one side into concentration camps, or
Holding international or military tribunals to hold the leadership of the other side accountable for genocide,

it becomes harder and harder to imagine either side backing down. When we are in an endless bidding war for the attention of leadership that controls the levers or force through government—or to recreate those systems of government (which would be viewed as an act of war), we are in a dollar bill auction.

"Watch this. I can mobilize the media to deliver the same message 174,000 times ('We Await a Vaccine') and score 2.4 million more casualties."

If we are lucky, some form of American police or military power has not been captured, and will do the right thing when the time comes. Another possibility is that the system will break down with a relatively soft landing. Nobody worries about paying ten bucks for a dollar if all the dollars are worthless. But if all that happens is that the power and wealth bubble deflates, then we will likely simply repeat the cycle all over again. Somebody would give up on the dollar bill auction after the dollar is worthless, or at least not worth getting irritated over.

Is there a better way forward?

Is it too late, now? Or can the game be unplayed?

This possibility is one of those "stepping outside the game" solutions. Sometimes you have to see past the illusion that precedes the game.

The System is Not the Individuals

Individuals might play the dollar bill auction, but the individuals together as a system never would. I'm not talking about socialism or communism. I'm talking about individuals in a community. Community is the technology of cooperating individuals. Games of wins and losses might be tolerated as learning experiences, but when the rules dictate warfare, the community can figure that out and put an end to it.

Let us assume for the moment that the Kunlangeta set up the dollar auction game, with almost certain profit in mind. If people die and land or resource prices plummet, they are the ones with trillions of dollars in dark pool wealth on the sidelines, waiting to buy up entire cities worth of real estate, and build back better.

The solution is challenging, but not hard to describe. First, the crowd must understand and recognize the game (so share this article, both with the vaccine partisans and those who resist). That way, the Kunlangeta are out the dollar they spent on all their propaganda and corrupt vaccine machinery. The next part will be hard for many to fathom, but it's necessary. Whatever remains of the Kunlangeta must be brought back into the community. They exist as part of a balance that was shattered long ago. Evolutionary progress is not just something that happens to individuals, but in balance with tribal attributes—even the rare members of the tribe like the psychopaths and the schizotypals. If their attributes prove inessential to human progress, future generations will have fewer of them.

Why did we ever think evolutionary progress was entirely only about the individual, anyhow? (Cue introspection about false dichotomies.)