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Does Game Theory Hold the Answers to South Africa’s Economic Problems?

Image by Charles Forerunner on Unsplash

Game theory is the science and math of decision making in social interactions that was pioneered by John Nash. A game is any interaction between multiple parties in which each party’s payoff is affected by the decisions made by others (Hayes, 2022). There are different types of games namely competitive/non-cooperative and cooperative games. Competitive games are the most common with the most brought up example being the Prisoner’s dilemma. These types of games are where the players play against each other to have winners and losers. In competitive games, the meta (most effective tactic available) is known as the Nash’s Equilibrium. The equilibrium is reached when a player makes the choice that leaves them better off no matter what their opponents decide to do. I tend to view the current economic landscape as a “triumvirate” where government, the private sector and the public make up the three players. The three parties all act in their self-interest with each player looking to win the game. In most democracies, politics is a short-term game and business is a long-term game.

Politicians especially in the highest office are usually limited in terms of how long they can remain in power. In South Africa, the President’s time in power is limited by the constitution to two terms (Constitutional Assembly, 1996). The economic climate is such that politicians generally focus on maximising their personal utility first and foremost then looking towards public good later out of fear of having limited time in office. They are also pressured to enact the policies they promised their sponsors (who are usually big business) in return for election funding. These usually come in the form of tax breaks and friendlier regulation. Failure to do so results in loss of sponsorship for future elections and replacement by other willing parties who will uphold the status quo.

CEOs of corporations do not have restrictions regarding how long they can stay in charge of their organizations. They are also in charge of considerable amounts when compared to the countries they operate. In some cases, companies grow into behemoths worth more than countries. This means that business has a lot of leverage power. Big business will not invest locally when they feel that the country is unstable. They will logically keep maximising profit and holding huge amounts of capital on their hands until they feel the investment will benefit them most. A strong balance sheet is very powerful and influential because it allows for the ability to purchase assets at huge discounts during times of economic and public turmoil e.g., Global Pandemics.

Whilst we do not have South African Companies that are bigger than the country value wise, we do have some serious giants. Sasol Ltd for example made revenue around USD11 billion (R162 billion) for 2021 (Forbes, 2021) at a time when the national budget for the nation projected a national revenue of R1.35 trillion (South Africa Government, 2021). This means Sasol made roughly 12% of what the whole country was projected to make! The world is increasingly connected and the sky's the limit when it comes to growth for big companies. Although GDP, market capitalization and revenue are not like for like wealth metrics, the comparison clearly highlights the increasing power of big business and the corporate future that may await us (Real Business Rescue, 2022). This power dynamic between government and big business suggests it would make more sense to look at government for short term solutions and the private sector for long term solutions.

The public is the last player with the potential to have the most leverage if they are united. Unfortunately appeasing the masses using grandiose displays and empty promises is usually enough to make them happy due to division within the people. There are numerous causes for division on namely race, nationality, tribe, and class just to name a few. The solution to most of our problems would be for the general population to take the power they have and leverage it. A united and focused public can completely change the rules of the game. The new game would be a cooperative game instead of a competitive game. Cooperative games are games where every player has agreed to work together towards a common goal. Leveraging the power to vote against the government and the power to of being both the workers and customers of businesses will push this change. People are flirting with the idea of socialism being the solution, but I would rather people push for responsible capitalism where the powers of the government and business are kept in check.

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Interesting article and good explanation on the dynamics on the overview of game theory in the South African

Bradley Ngoni
Bradley Ngoni
Apr 21, 2022
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Thank you. I'm glad you found the article interesting and informative.

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