At its strategic core, the partial government shutdown — soon to enter a record-breaking 22nd day — is a breakdown of bargaining: two sides, no solution in sight. President Trump and congressional Democrats are engaged in the latest battle of a game that economists have studied for decades. If politicians can’t end the stalemate, surely game theorists can. OK, they can’t. But they can help identify what’s gone wrong, and you and I may be part of the problem.
Let’s start with the basics about what bargaining really is: the allocation of a scarce resource and the setting of a price.
In regular, everyday, one-on-one bargaining, it’s beneficial to act more intransigent than you really are. Suppose you’re trying to sell me a used car, which happens to be worth exactly $1,000 to both of us. While we stand alone on the lot, I’ll say smart, strategic things like, “I’ll pay $800 for this hunk of junk and not a penny more.” And you’ll say smart, strategic things like, “I won’t part with this beauty for any less than $1,200.” And so on we dance around that $1,000 number, eventually arriving at some agreed-upon price at which point I’ll pay you and drive home in my new used car. In traditional game theory models, we’ll always make some deal.
Political bargaining is different: There’s an audience. Voters are watching.
That fact — the existence of observers — upends the incentive structure that was in place when we were bargaining alone on that car lot. Rather than try to appear intransigent, now the bargainers have an incentive to try to appear reasonable — because many voters like reasonable politicians.