The Prisoner’s Dilemma and the Paris Accord

Environmental protection is often painted as an opposite to economic growth. And in the most simplistic sense, this framing has some truth to it. Totally unchecked growth, with no regard for environmental impact, only makes sense in a world where resources are infinite and equity is irrelevant, where we will never run out of new land to strip and reshape, and where the most noxious industries can always be passed off to the next country down the development ladder, without the cumulative consequences of pollution catching up to us.

In light of this inherent tension, it’s no surprise that members of the current presidential administration push the spotlight onto immediate economic impacts whenever they discuss the latest attempt to roll back a major environmental regulation. And it wasn’t a surprise that Trump’s declaration of intent to leave the Paris Agreement last summer came with a statement about how keeping the U.S.’s climate commitments would hurt the nation’s coal, automobile and other industries — ignoring the much broader economic impact that climate change is likely to have on the country (and world) in the longer term.

Plenty has been written by now about the planned withdrawal from Paris, and most people interested in meaningful and proportionate climate action seem to agree that withdrawing is a bad choice. While by no means perfect or complete, the framework is a concrete starting point of a longer-term negotiation; refusing to be a part of it destroys our credibility in future attempts to influence the global policy decision that are certain to come from it. The federal refusal to take climate change seriously has already damaged our international relationships and leaves the U.S. increasingly vulnerable to potential future sanctions. The EU, for example, is already considering a ban on trade deals with countries that ultimately fail to adopt the Paris Agreement. The global community, seeking new leadership and momentum on climate, may well move on without us, ignoring our now-empty seat at the table.


In many of my classes this year, we’ve looked at the nature of incentives that drive economic and environmental decisions across many settings. No model should be treated as a substitute for reality, but certain structured stories can be useful lenses on how people act (or fail to act) as groups working toward common resource goals (These goals may range from ensuring a future supply of wood from a forest to maintaining the health of a communal grazing pasture to keeping a reservoir’s water drinkable in the face of increasing industrial and residential runoff).

Such models can also help us understand the nature of the challenges we face in achieving these goals, based on the economic and behavioral dynamics that may underlie our specific problem. These models can scale from simple experimental games played in a laboratory setting all the way up to national and international environmental policy questions. One of the most fundamental of these models is known as the Prisoner’s Dilemma.

Classical economics (and the policy recommendations it suggests) are underpinned by the assumption that humans behave as perfectly rational actors, making all decisions as a bottom-line comparison of marginal costs and marginal benefits. If a certain action will increase the number in the Rational Economic Man’s back account, or benefit him some other way in an immediate net sense, he will tend to do it.

The Prisoner’s Dilemma is the name given to situations in which two individuals making the “rational” choice — the choice that maximizes their bottom line — may in fact leave both individuals worse off. The basic story has been explained a hundred different ways since its articulation in the 1950s, but most versions center on a pair of prisoners, each under interrogation in separate rooms for a crime they’ve committed together. If neither chooses to confess or testify against the other, they may each get a relatively light sentence (or get off scot-free, absent damning evidence). If only one chooses to testify, the other will receive a heavy sentence and the squealer will have their sentence reduced. If each testifies against the other, however, both will be locked up for a long time.

From each prisoner’s perspective, the smart strategy is to testify. If Prisoner A testifies and Prisoner B does not, he gets a light sentence. If Prisoner B chooses to testify and A does not, A gets more severely punished than if he had also ratted out his partner in crime. Because both prisoners have meaningful incentives to testify against the other regardless of what the other has done, both are likely to do so — leading to both ending up in jail for much longer than if they had trusted the other to keep silent, and done so themselves.


There are situations all over the real world that echo this kind of dilemma game dynamic, where making a perfectly rational sequence of short-term decisions (as other actors do the same) may actually undermine everyone’s interests in the long run. Consider many people racing to catch fish from a lake, each trying to avoid being out-competed by the other fishermen on the market, until one day there are no fish left for anyone. Consider many people harvesting valuable timber trees, each additional tree in their marginal best interest, until the forest ecosystem as a whole is permanently degraded for everyone. Consider many people pulling just a little more water from an aquifer under Houston, leading gradually to parts of the city permanently sinking (as actually happened in the last century, drowning whole neighborhoods before groundwater regulation was finally put in place).

Perfectly rational actors acting in their short-term best interest may bring about a bad outcome by refusing to coordinate and cooperate with others — by ignoring the weight of future outcomes in favor of today’s bottom line, and (perhaps rightfully) fearing that others will take advantage of any potential profits they might leave on the table by acting responsibly. This kind of large scale collective trend toward an avoidable negative outcome is often referred to as a Tragedy of the Commons scenario (another useful economic story that will be the subject of a future post).

It’s clear, of course, that real people don’t always behave like the prisoners in the story. Cooperation to maintain natural resources is found all around the world in the success of private property rights schemes, government institutions and small-scale agreements that develop at the community level. And even in simple laboratory game settings, when people play repeatedly with the same “opponents” over time and build some kind of working relationship, they can and do come to agreements to cooperate with one another and share “resources” in a more sustainable way. But as long as the underlying incentive structures pushing people toward overexploitation remain as they are, people will be drawn to break or circumvent the institutions built to protect natural resources. Too many actors breaking such an agreement can end up damaging the cooperative spirit of the involved community itself and potentially drag the group back to Square 1.


The problem of organizing a global collective climate change response can be thought about as the most high-stakes Prisoner’s Dilemma the world has ever faced. If we think of all countries in the world as players in round after round of such a game, there are strong incentives in the short term for each to make the “rational” choice of refusing to cooperate toward global carbon emission reductions. Investing in clean energy is still pretty expensive (which is why funding from wealthy nations to support these investments in developing countries is an essential part of any meaningful global climate response). Any individual country could benefit in the short term from reneging on their part of a proposed emissions-reduction bargain, giving their own economies a relative benefit on the global stage (unless some kind of meaningful sanctions were implemented in response).

But in the long run, refusing to cooperate on climate is a losing strategy for all nations. While uncertainty exists on the exact extent of future damage, we know by now that the degree of likely damage is extremely serious, and that the longer we wait, the harder it will get to prevent or curtail the worst effects. While some countries will likely be hit with more damage than others based on geography and other factors, all countries are likely to feel the impacts in some way.

Responsible global actors must make their decisions based on the long term. Biting the bullet and committing to meaningful climate action now will hurt a lot less than scrambling to catch up 10 years from now, or than missing the window of opportunity to act altogether. Paris is not a trade deal, and it’s not a sale — it’s an act of self-preservation, and a delicate, ongoing exercise of international trust in uncertain times for global politics. Many cities, states and other subnational actors have recognized this, and are working to help keep the U.S.’s commitments in spite of the abdication of leadership at the federal level. If no change of direction is seen from the White House on this issue in the next few years, we had better hope these smaller actors succeed in overcoming their own Prisoner’s Dilemmas — because the only way to “win” on climate negotiations is for all countries to work together.

Photo: Former French President Francois Hollande signs the Paris Agreement, 2015 (Présidence de la République)

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