Monday 6 May 2013

Schelling, Focal Points and the Problem with Partial Vegetarianism

Following my previous post on Thomas Schelling’s contributions to Game Theory, I have been reflecting on another key idea from his 1960 book ‘The Strategy of Conflict’. Schelling introduced the concept of ‘focal points’ in situations where two parties have to coordinate. The idea is that when faced with several options, people often have a sense of which is the ‘most obvious,’ and when coordination is required they are likely to pick this obvious solution, in the knowledge that the other party is also likely to pick it.

 The classic (abstract) example of such a coordination problem is when and where you would go to meet somebody in New York City, if you had not agreed this ahead of time and communication was, for some reason, cut off. What do you think? When and where would you show up? (see below for the solution*)

The idea of the focal point is important for several reasons, of which I will highlight two.

Firstly, focal points do not fit well with standard ideas in economics. Most modern microeconomic theory deals with curvilinear relationships between variables: equilibrium is defined by the utility-maximizing point on a curve. We find this point using calculus and marginal analysis, and so we assume the curve is continuous. The focal point concept throws continuity out of the window. Even when we introduce game theory – a critical implement in the modern economist’s toolkit – this only tells us that Nash Equilibrium outcomes are stable, not which Nash Equilibrium is most likely. Somehow focal points allow people to efficiently choose between different equilibrium positions, even without communicating.

This leads onto the second, deeper, point. Focal points challenge the economist’s mechanistic idea of ‘rationality.’ It is very hard to specify what constitutes an ‘obvious’ choice. Often the cues that lead to particular choices are idiosyncratic to that particular context. Given a number of different equilibrium positions, standard models of rational behavior might suggest picking randomly between them, or undertaking exploratory search to see what the other players pick. It is difficult, if not impossible, to identify focal points using a mechanistic or analytical solution, the best we can do is identify heuristics for finding them. Yet gravitating towards focal points tends to lead to better outcomes for individuals than a strictly ‘rational’ behavior, and so behavior is in some sense ‘hyper-’ or ‘super-’ rational.

The idea of focal points has been broadened from Schelling’s original coordination-game context, to the general tendency for people to fixate on certain ‘obvious’ equilibrium points of behavior. The tendency to do this seems to be deeply rooted in human psychology. This has major consequences for self-control and our inability to ‘do things by halves.’ It is much easier to give up a certain behavior outright than to stop doing it half the time – for example, I am fully aware that meat production is environmentally very damaging. Vegetarianism would therefore be an ethical behavior for me to adopt – but I love eating meat so much that I can’t bear the thought of giving it up entirely. Now, I could halve the environmental damage my meat consumption does by halving my consumption. However, as I have found (upon trying to limit my meat consumption), it simply does not work like that. A plan to only eat meat on Fridays falls apart when there is a delicious steak on the cafeteria menu on Wednesday!


*This example, conceived by Schelling, has been used many times by researchers as a quiz question. Overwhelmingly people opt for 12 noon as the most ‘obvious’ time to meet. The place chosen varies between two obvious locations: New York residents tend to pick Grand Central Station, whereas out-of-towners choose the top of the Empire State Building.

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