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What game theory says about Labor’s woes

Since December 2009, Labor has had an agonising problem. It has been unable to combat the brilliant wrecking strategies of its conservative opponents, who are prepared to do or say anything if it will assist in removing Labor from power.

While both sides of politics readily indulge in populism in opposition, Tony Abbott’s opposition has pursued a strategy accurately summed up by Paul Keating as “if you don’t give me the job, I’ll wreck the place”. This has included such tactics as walking away from a bipartisan policy on an emissions trading scheme, even after a deal brokered between the major parties over legislation, persistently claiming Australia represents a “sovereign risk” to foreign investors and that impoverished African countries were better destinations for foreign investment, claiming that Australia could default on its public debt, opposing economic stimulus to save jobs, rejecting the election costings process established by the Coalition itself when in government, and undermining consumer confidence with hysterical claims that a modest carbon pricing package would inflict massive damage on the economy.

It has also included the Coalition turning its back on some the key economic reforms of the past 30 years — rejecting a market-based solution for carbon abatement in favour of a big government winner-picking approach, increasing company taxes, blocking reforms to lift Australians’ retirement savings and trying to block the extension of means-testing of middle class welfare.

Regardless of the content, the strategy has been masterful —   Abbott has turned a disastrous polling position in December 2009 into an almost unbelievable lead and is just one by-election from government. He has written a playbook for future opposition leaders with his performance.

Labor’s answer under Julia Gillard was initially to try to match the Coalition’s populism where it could on issues such as asylum seekers, climate change and its mining tax. But since clinging on to government, it has settled for doggedly pursuing a reform program and hoping voters would reward it for its diligence. In effect it has had no real strategy for dealing with the Coalition approach, especially as it has been unable to communicate effectively with voters due to its own ineptitude, Gillard’s unpopularity and a hostile media environment.

Interestingly, the Democrats have gone through a similar, indeed more extreme, ordeal in the US as the Republicans have adopted an economic wrecking strategy so successful that Standard and Poor’s specifically blamed them for its ratings downgrade. Barack Obama has also tried to shift to the Right, particularly on fiscal policy, but like Labor here it has done little except alienate his party base and prompt them to look for alternatives.

In  here and in the US, conservatives’ highly successful strategies have been informed by a simple belief that their opponents have no legitimacy, and anything is justified by efforts to remove them from office. In effect, one side — the progressives — have been left fighting under the self-imposed rules of traditional politics, while their opponents are operating with no constraints. It’s almost funny to watch, especially as the traditional major progressive parties in the US and Australia are hopelessly inept even when playing by the rules, let alone in the more freewheeling environment created by their opponents.

What are these parties to do? Their current strategies aren’t working.

Game theory provides an interesting solution, though not an especially pleasant one. The dilemma for progressive parties matches the “iterated prisoner’s dilemma” of game theory. Faced with a “prisoner’s dilemma” choice in which two players both benefit from co-operating, but one player gets greater benefit from not co-operating (“defecting”), the rational decision is for both players to defect. That’s not how the model has worked in Australia in recent decades. Since the 1980s, both sides have, to various degrees, acted as what are called “super-rational” players — that is, they have assumed that the other player is rational like them, and will reach the same conclusion as them, that there is benefit to both sides in co-operating, and have therefore decided to co-operate.

On occasion, the co-operation wasn’t forthcoming over economic reform — the Coalition, for example, tried to wreck Medicare and compulsory superannuation in the 1980s and 1990s, and Labor tried to block the GST even after John Howard had won an election that was in effect a referendum on it. But “super-rationality” has entirely broken down on the Coalition side since Tony Abbott became leader.

But in the iterated prisoner’s dilemma, you play multiple rounds of the same game and, crucially, remember what your opponent did last time. This changes the game entirely, and makes it more closely resemble politics. Under the iterated prisoner’s dilemma, the most effective strategy is “tit for tat” — you co-operate until your opponent defects, then you defect as well, until they co-operate again, when you co-operate. Adding a small probability of co-operating even after a defection provides a circuit-breaker for cycles of defection.

But continuing to co-operate while the other side regularly defects is the worst possible outcome. That’s what Labor (and the Democrats) are doing now — continuing to play the traditional game while their opponents refuse to. It’s the suckers’ play.

In short, progressives’ smartest response to the defection by conservatives is to do the same, to stop playing by normal political rules, abandon the pursuit of reform and sound economic management and concentrate on punishing their opponents on the basis that continuing to co-operate simply means they lose, every time, whereas responding with defection is more likely to yield co-operation.

That, of course, is bad news for the public interest and good policy. Countries and economies naturally benefit from the party in government maintaining sound economic policies, even at some political cost to that party.

Over the longer term, however, the picture isn’t so clear. By continuing to co-operate rather than defect, progressives continually reward conservatives for defecting. This ensures that defection will become entrenched as a conservative strategy, permanently harming the national interest. By switching to tit-for-tat, progressives might cause temporary harm to the national interest, but in doing so compel conservatives to resume co-operating. In the long-run, Labor copying the Coalition in abandoning sound policy might mean both sides resume sound policy more quickly.

Theoretically speaking.

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  • 1
    The Pav
    Posted Monday, 15 August 2011 at 2:32 pm | Permalink

    There is another option/strategy.

    Stick to good policy, keep your standards but communicate better.

    Select CLEAR positive and highlight this.

    Ask the wreckers what there answer/position is and when they fall back on there usual reply “we’re not the gov’t /we will release our policy in due course” deride them for cowardice, highlight their errors (eg an election policy where they couldn’t add, run endless ads showing Abbott backflipping, describe Abbott as an extremisty and show him repeatedly tied to the Australian equivalent of the Tea party.

    How about an add “Only in America could Abbott be a possible leader……oops it might happen here is that what you want”

    There’s an endless supply of ammo if they want to play hardball so why don’t they?

  • 2
    Posted Monday, 15 August 2011 at 2:34 pm | Permalink

    This analysis and game theory leave out the electorate, a crucial omission in an analysis of a democracy. While Labor may lose the next federal election the electorate will remember it as a responsible government. If Labor follows Abbott the electorate will remember Labor as an irresponsible government, making it that much harder for Labor to regain power.

  • 3
    tinman_au
    Posted Monday, 15 August 2011 at 2:35 pm | Permalink

    Heck, it worked for a long time with JH didn’t it and Tony Abort just learnt how to play it from the master…

  • 4
    Perry Gretton
    Posted Monday, 15 August 2011 at 3:14 pm | Permalink

    @The Pav: My thoughts exactly.

    I’m amazed that Labor isn’t ridiculing Abbott at every opportunity (of which there are countless).

    I’d also constantly compare Abbott with Turnbull, the irrational versus the rational. (“What would Turnbull have done?”)

  • 5
    Western Red
    Posted Monday, 15 August 2011 at 4:03 pm | Permalink

    It does not necessarily need to be damaging policy wise. How about refusing to deal with any member organisation of the so called “Australian Trade and Industry Alliance” ? Maybe get the ATO to take a close look at the transfer pricing arrangements of one or more of the miners ? How about sacking or not renewing the terms of the various Liberals appointed to plum jobs by this government ? How about getting rid of the Future Fund boss ?

    In fact , on ATIA why not spend big as suggested on the Gruen Transfer on a tabloid ad campaign in support of the climate change bill ?

    I also agree with some of the other comments and have a pet peeve that Labor MPs from the top down seem to fail to do the basic political response - (i) When the Coalition was in power you were useless because and (ii) Labor are great because we have done this so far and (iii) we still have an agenda to complete whereas the Libs are empty vessels. For example:

    The Coalition were in power for 12 years and they did nothing for same sex couples, in 4 years Labor has made nearly 100 changes to laws to help same sex couples, sure there is more that can be done and we will work with the community to build a consensus on our next steps, but we know that the Coalition have opposed us every step of the way and if given the chance will reverse the gains we have made for same sex couples.

    I have seen Labor people sitting mutely on this very issue while the other side carve them up.

  • 6
    Posted Monday, 15 August 2011 at 4:09 pm | Permalink

    No government should deal differently with another person because of its political position, and no department of the Australian public service and particularly the Australian Taxation Office should not treat any citizen differently because of their politics. To do so not only debases politics but undermines a basic principle of government service.

  • 7
    klewso
    Posted Monday, 15 August 2011 at 4:18 pm | Permalink

    I reckon that “playbook” of Abbott’s will only return dividends if “future opposition leaders” are blessed with a confluence of both a compliant media (happy picking their own winners and spreading negative publicity, through their market-share, to fix that boat-race of perception) and a government run by “country club hacks” treating government as their privelege.

  • 8
    David Hand
    Posted Monday, 15 August 2011 at 5:27 pm | Permalink

    Bernard,
    You give far too much credit to Tony Abbott’s negative campaigning and nowhere near enough credit to Labor’s shallow, poorly thought out, focus group driven populist policies. Everything they do is inept. The only contributing external events that I can think of are the GFC which drove them into deficit and the failure of Copenhagen.

    All other events that put them on the nose with the electorate are entirely self-inflicted.

    This high-brow resorting to game theory is just another way of blaming Abbott, Murdoch and Jones for Labor’s dismal performance. Gillard, Conroy et al do this almost daily and it is yet more confirmation that they’ve lost it.

    Their only chance is a successful introduction of the carbon tax and I think the’ve stuffed that one as well by compensating the end user too much, thus not driving the required behavioural change. But this issue could look a lot better for them iff the tax is in and working come 2013.

  • 9
    Paracleet
    Posted Monday, 15 August 2011 at 7:08 pm | Permalink

    Substitute the word ‘Un-Australian’ for ‘Negative’ whenever discussing Coalition policy and keep doing it till everyone is sick of it. And then keep doing it. Maybe add a “-” to Coalition (Coal-ition, Wit!). Start talking about ‘what would Malcolm Tunrnbull do’ moments (WMTD t-shirts anyone?).
    Call anyone who doesn’t agree with an idiot, an industry bought pasty, a lying sociopath. Lizard men from Zargon three etc. etc. Don’t have much too loose do they?

  • 10
    Harvey Tarvydas
    Posted Monday, 15 August 2011 at 7:58 pm | Permalink

    Dr Harvey M Tarvydas

    First class BK with some brilliant spasms.

  • 11
    Posted Monday, 15 August 2011 at 9:02 pm | Permalink

    No, the poison starts and finishes with News Ltd corporate propaganda smear machine - at editorial level. Abbott is a shouter and a moral weakling, hence the over compensation on exercise. Nothing like religion for a sinner.

    Abbott would be nothing without News Ltd or the shrieking cockatoo (white supremacist?) Jones.

    Oakes gave the measure of Abbott years back. Flip flop and an Iraq war goon. Nothing brilliant about Abbott. He’s low rent.

  • 12
    Harvey Tarvydas
    Posted Monday, 15 August 2011 at 9:27 pm | Permalink

    Dr Harvey M Tarvydas

    @TOM MCLOUGHLIN — Posted Monday, 15 August 2011 at 9:02 pm
    I think you may be right. The media players make him look mysteriously successful (look clever), lead him rather than follow him appeasingly?

  • 13
    Tim H
    Posted Monday, 15 August 2011 at 9:39 pm | Permalink

    Let’s not forget the biggest wrecker was Paul Keating when he beat the Coalition by opposing a GST that he knew was necessary. The only time I voted Tory. I’m sure Abbott and the others learned their lesson well from the master.

  • 14
    Ilona
    Posted Monday, 15 August 2011 at 10:01 pm | Permalink

    In short, progressives’ smartest response to the defection by conservatives is to do the same, to stop playing by normal political rules, abandon the pursuit of reform and sound economic management and concentrate on punishing their opponents”

    Intriguing, but how would they do this in practice? Isn’t it much easier to defect/wreck from opposition than from power? Which is precisely why an Abbott Govt will be a horrendous prospect, I suppose.

  • 15
    DF
    Posted Monday, 15 August 2011 at 10:55 pm | Permalink

    @ The Pav

    Agree entirely but there is just one problem - who is going to deliver the message? Gillard has been toxified by the media, Swan is a nice guy but lacks Costello’s chutzpah, and then who’s next? Where are Hawke, Keating, Tanner - people who can project a bit of gravitas and speak English not managerialism or bureaucratese?
    Shorten can do it - I’ve watched him on QandA - but is being held down. Rudd can do it too but he has chosen not to, and anyway if he did it would only confuse things because people would ask, as they already do, why is he not PM?
    They’re a competent government but don’t seem to have anyone with any spark or inspiration to stand out the front and tell the story.

  • 16
    The Pav
    Posted Tuesday, 16 August 2011 at 11:13 am | Permalink

    @ DF

    I think the govt is gun shy.

    Remember when Rudd was PM all we heard then was that it was a Govt of Spin.

    I think they are now scared of being accused of that.

    Smith could do the gig.

    BTW has Abbott ever had a real job. As far as I know his CV is Student, Journo, Adviser the MP

    I note that a recent article states that the Australian Public Service is smaller than 20 years ago. So in a world that has got more complex & more demanding they Libs want to reduce the PS. I would bet that if you took out the resources allocated to the “War on Terror” then it would have shrunk significantly.

    Sloppy Joe and his buffonns think they can get $70B in savings from a bloated PS. Only if the get rid of support staff for MPs

    I deal with the commercial sector, State & Commonwealth & the not for profits on a daily basis and the most useless , hidebound, ignorant & decision averse section is the private sector (small & big business equally although the telcos & the banks have a mortgage on being useless)

  • 17
    Bellistner
    Posted Tuesday, 16 August 2011 at 12:35 pm | Permalink

    I deal with the commercial sector, State & Commonwealth & the not for profits on a daily basis and the most useless , hidebound, ignorant & decision averse section is the private sector (small & big business equally although the telcos & the banks have a mortgage on being useless)

    I’d go along with that. At my work, I reckon we could do away with every third Manager and not notice a difference.

  • 18
    The Pav
    Posted Tuesday, 16 August 2011 at 12:52 pm | Permalink

    @ Bellistner

    My theory is that education is hard to measure therefore senior management wanting to prove they “are doing something’ drop training and increase the rules. (sorry, policy & procedure)

    Since you can’t have a rule for every situation and by dropping the training the troops have neither the skills nor the environment to make decisons/improvise/adapt you end up with a restricted moribund workforce

    Substituting legislation for education is what has happened (ever tripped “privacy” responses when it clearly doesn’t apply) It neither improves efficiency, service or reduces costs.

    Nevertheless Senior management goes that way and then promptly gives themselves a huge bonus for being so smart.

    Australian Senior Management & leadreship in the corporates is appalling

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