A Game Theory View of the Government Shutdown

As the government shutdown yet again this Friday I was having bad flash backs to 2013. Back then it went on long enough for journalists to start doing thought pieces about the story behind the story. I went back and re-read some of the articles about the standoff and in particular two pieces about the game theory behind the shutdown.

In game theory we strip away the emotions and even the particular issues and look solely at the incentives of the participants. An econ blog at Cornell had an interesting interpretation of the shutdown as the classic prisoner's dilemma from economic theory. Mid way down the page you'll see this a 2 by 2 box giving a plus one or negative one for each outcome (back down or fight) for each player (President Obama and Congress). Because Obama had already won reelection and could not be elected again, it was only Congress who had something to lose. Obama had a winning strategy in almost every situation. Obama only lost if he backed down while Congress chose to fight and that seemed unlikely since he could control his own behavior.

Another view attributed the shutdown to the structure of our political system. The President, the Senate, and the House are all elected for different terms and by different constituencies. Winning a national election is different from winning a statewide election, which is in turn different from winning a particular congressional district. With varying terms, each player has a different calculus. The Senator running for President in two years has different incentives than one running in 6 or a Congresswoman who needs to get reelected. The President has different incentives in his first term than his second.

I think these are both important perspectives and certainly clarify what is really happening from the talking points about any particular issue, but it doesn't explain our current shutdown. The incentives this time around are muddier. Republicans want to appear like they can run the government so a shutdown is bad for them but not that bad so they are unlikely to give up too much. The democrats seem more divided. Many want to take a stand on DACA but others are worried about winning reelection in red states. Still others feel like things are going their way in public opinion and they don't want to risk any blame blowing back to them. Don't mess up a good thing would be their mantra. With a deal for 3 weeks in the offing, this topic will leave the headlines for a few weeks but a final solution is cloudy.