Tuesday, June 19, 2012

Two-Level Games in Real Life

Our students sometimes complain that the stuff we teach them about is too theoretical, too abstract, or too esoteric to be useful in "real life". We face a constant challenge in getting them to see the connection between the "airy-fairy theoretical stuff" and the headlines in the newspapers and on TV.

Every once in a while, however, a really great case comes along that almost perfectly illustrates the theory we're trying to get across. For those of us who have tried to get across the somewhat abstract notion of the "two-level game", Greece is right now providing that perfect example. If I had a European politics class (which I don't - I'm not nearly enough of a European expert to pull that off), I would love to game this out.

Greece, of course, just went through an election to try to fix the last election that failed to produce a viable government. This latest round seems to have solved that problem, only to have handed the likely new government a potentially insoluble problem: how to strike a bargain with its own population such that Greeks don't shut down the country with protests, fail to pay their taxes, or any number of other things they could do, while simultaneously reaching a deal with the rest of Europe (primarily, Germany and the EU central bureaucracy) on some kind of budget-saving austerity program.

As I've pointed out before, there may not be a solution to this problem. Germany and the international bankers may demand more pain than the Greek population (or a sufficient minority of it) is willing to bear. I heard one analysis this afternoon suggest that Greece's exit from the Euro is all but assured, simply because the chances of Greece voting (at the ballot box or in their daily behavior) over and over again to support austerity is extremely unlikely.

The new Greek government will find out soon enough how very real this "theory" is. These next few months should prove an excellent case study - although I doubt that the Greeks, or many Europeans for that matter, will appreciate the lesson.

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