Economics: A Team Effort

I was having a discussion this morning with a friend on the weaknesses of Madison’s public transportation system. There are several, some manmade, some geographical, all are serious. That’s for a separate blog entry.

Public transportation, it seems, is a great real life example of Nash Equilibrium (or, Cournot-Nash). If you’ve studied economic history, or at least seen A Beautiful Mind, this will be a review. Basically, John Nash discovered that when groups of people collectively self-sacrifice, everyone can profit; when each individual sacrifices the interests of the group for their own selfish gain, everyone loses. Before Nash, we could only prove that this could work with groups of two.

By the way, that’s a very Catholic mode of thinking. But I digress…

It made me recall a couple of years ago when Houston residents had to flee the gulf region to avoid Hurricane Rita. The highways were so crowded that traffic was stuck for days, cars ran out of gas, etc; more importantly, though, public safety was at risk, as people couldn’t effectively leave Houston.

What would a Nash plan say?

1.) Nobody take a car.
2.) Everybody meet at any of certain predetermined convenient large spaces to exit the city.
3.) From there, board a bus.
4.) The bus will escort you to a hotel/shelter/alternate site.

The gain:
· No one will run out of gas.
· No one will be stuck in traffic.
· Most importantly: We will all leave Houston and all of us will be safe.

The cost:
· You don’t get the “convenience” of your own car.

Economics is the study of how to maximize the effectiveness of minimized resources. That ours is not a culture of public transportation will bite us before long. My fear is that our societal makeup has crumbled beyond this being feasible.