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Behavioral Economics

Unlocking the Power of Karma

The influence of reputation in life and in games.

Key points

  • Karma operates on the principle that every thought and intention carries energy, which has consequences.
  • Tiny cues reveal profound clues about each of us, and people can tell whether a stranger is a giver or taker.
  • Using game theory, we can show how reputation, forgiveness and past actions may impact decision-making.

We know that crime doesn’t pay — the Victorians already told us so — but are we better off spending our lives doing good?

If ancient Indian religions are anything to go by, the answer is yes. The concept of karma operates on the principle that every thought, action, and intention carries energy, and this energy has consequences. The word “karma” itself comes from the Sanskrit word “kri,” meaning “to act.”

Simply put: Positive actions and intentions lead to positive outcomes, and negative actions and intentions lead to negative outcomes. Karma emphasizes the responsibility of individuals to act ethically and with compassion, as their actions can influence their own destiny and the lives of others.

In Hinduism and Buddhism, the law of cause and effect extends to future lives, meaning that all the consequences of our actions and intentions influence our future. People who do a lot of good in this life can reincarnate a little closer to nirvana, and baddies will reincarnate, well, badly.

What does the math say?

Karma has also been adopted in various secular and philosophical contexts to convey the consequences of one’s actions in everyday life.

From the toolbox of mathematics, game theory’s multi-turn games offer a way for us to analyze “karma” and make predictions. In a repeated game, karma functions as a form of reputation or a long-term consequence of a player’s actions. The choices and behaviors of individuals in one turn of the game can have repercussions that affect their interactions and outcomes in future turns.

Turn by turn, players can take into account the potential impact of their actions and build their reputation accordingly, which can affect how others interact with them in subsequent rounds. Rational players may choose cooperative strategies in order to build positive karma and receive reciprocal cooperation in later rounds. Conversely, players with negative karma may face retaliation or a lack of cooperation from others.

Games are simple experiments where players usually need to make a choice or two. The “prisoner’s dilemma” is a classic example in which two players must choose between cooperation and betrayal, without being able to talk to each other. If one prisoner confesses and the other doesn’t, the one who confesses will be released immediately and the other will spend 20 years in prison. If neither confesses, each will only be held for a few months. If both confess, both will be jailed for 10 years.

By exploring karma through game theory and multi-turn games, we gain an understanding of how reputation, forgiveness, and past actions can impact strategic decision-making and overall outcomes in interactive scenarios.

Axelrod’s tournaments

Robert Axelrod, a prominent political scientist and game theorist, is well known for his work on cooperation and its evolution. In his influential book, The Evolution of Cooperation, Axelrod uses game theory to explore how cooperation can emerge and be sustained in various situations. To study strategies for cooperation, he organized the famous “Iterated Prisoner’s Dilemma Tournaments,” where computer programs competed in repeated prisoner’s dilemma games.

Axelrod’s tournaments featured strategies submitted by participants worldwide, each represented by a computer program. These code snippets faced off against each other in multiple rounds, earning points based on their performance in prisoner’s dilemma iterations. After each round, a program would learn and adapt its strategies based on its opponents’ past behavior.

Surprisingly, a simple strategy called “Tit for Tat” excelled in Axelrod’s tournaments. The approach was straightforward: Start with cooperation and then mimic your opponent’s previous move in subsequent rounds. If the opponent cooperated, the program would also cooperate in the next round; if the opponent opted for betrayal, the program would retaliate.

Tit for Tat’s success stemmed from its ability to reciprocate cooperation, which fostered mutually cooperative interactions. The strategy avoided unnecessary retaliation and forgave its opponents’ mistakes, quickly returning to cooperation mode when its opponent began cooperating again.

Givers, takers, and matchers

The triumph of Tit for Tat in Axelrod’s tournaments highlights the power of reciprocity and emphasizes the significance of cooperation in repeated interactions. It also underscores the importance of forgiving strategies that prevent escalation during conflict, an approach that promotes long-term cooperation in various real-world scenarios.

In game theory, forgiveness enables players to rebuild cooperative behavior. It offers those with negative karma a chance for redemption and the opportunity to regain trust with others. But how does this translate to real life? And if real life is a game, would it be a single round or would it behave more like a multi-turn game?

At first glance, the environment should matter greatly. Surely, a close-knit community is more of a multi-turn scenario. And in a big city with millions of people, it is impossible to personally meet everyone, even within one neighborhood, so it has to be easier to get away with anything there.

In reality, tiny cues can reveal profound clues about each of us, and people can pretty accurately tell whether someone is a giver or taker. In his book Give and Take: A Revolutionary Approach to Success, author Adam Grant writes, “You never know where somebody’s going to end up. It’s not just about building your reputation; it really is about being there for other people.”

Grant emphasizes the importance of treating others well regardless of the relationship’s potential benefits. A person’s reciprocity style plays a crucial role in how they approach interactions with others. Takers prioritize their interests over the needs of others, aiming to maximize their gains while giving as little as possible in return. Matchers seek to maintain an equal balance of giving and taking, and givers focus on helping others without expecting anything in return.

As the English writer Samuel Johnson purportedly wrote, “The true measure of a man is how he treats someone who can do him absolutely no good.”

References

Prisoner’s Dilemma https://www.psychologytoday.com/us/basics/prisoners-dilemma

Axelrod, Robert; Hamilton, William D. (27 March 1981), “The Evolution of Cooperation” https://doi.org/10.1126/science.7466396

Give and Take: A Revolutionary Approach to Success. Adam Grant, New York: Viking, 2013. https://adamgrant.net/book/give-and-take/

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