Thursday, April 16, 2009

Three predictions on the future of Iran, and the math to back it up

Bruce Bueno de Mesquita
Lecture, TED Video


The basis of Bruce Bueno de Mesquita's TED Talk is to apply the game theory approach to the question: What is Iran likely to do in the next couple years? In order to attempt to predict complex questions such as this, he insists that we (analysts) science instead of continuing to rely on "seat-of-the-pants wisdom". This type of analysis and its resulting prediction can be used in most types of complex negotiations and conflicts, or any situation involving coercion. It has applications in business mergers, environmental policy, education, litigation, politics, etc.

Game theory is a branch of mathematics. It makes three key assumptions about people:
  1. People seek what is best for them ("rationally self-interested)
  2. People have a set system of beliefs and values
  3. People face limitations.
Since all people are rational and always tend to act in their own best interests (with the exception of 2 year-olds and schizophrenics), this tool can be applied to most any individual (even terrorists).

The first step is to consider who the people are who influence a rational person into believing that something (a change in policy, a position, belief, etc.) is in their own best interests. Presidents, for example, surround themselves with advisers, who in turn surround themselves with their own advisers, creating a pyramid of influence. Since many people go into the process of shaping a decision, we must pay attention to all of the actors.

At first glance, this may seem like a relatively simple task, considering the small number of cabinet-level advisers privy to the president. However, using simple math factorials, we see there are 120 interaction linkages between just one person and four of her advisers.
Once we double the number of decision makers to 10, we are left with the staggering number 10!, or 3.6 million linkage interactions. Obviously computers are an invaluable part of this type of analysis.At this point, there are several main things that one needs to know in order to conduct this analysis:
  • Who are the players that have a stake in the outcome?
  • What do they say they want?
  • How focused are they on the problem at hand?
  • How much influence do they have on the decision maker; how much clout?
In shaping policy, all people care about two main things: the outcome and receiving credit for their work. De Mesquita points out that most people fall between the outcome and the credit, and if we know to what extent they lean, we can influence their behavior. This leads us to determine what are their choices, values, chances they are willing to take, and their beliefs about other people. This information can be gathered from the Internet, news sources, and experts.

History is not relevant to this type of analysis. The computer does not factor for history and past actions (history is of little importance to de Mesquita, who refers to the Westerfield publication from Yale University Press that cites a declassified CIA study indicating that 90% of the time models were right even when the experts were not).

In applying the method to the question of Iran, de Mesquita focused the analysis on making 3 predictions:
  1. What is Iran likely to do about nuclear weapons?
  2. What is in store for the theocratic regime?
  3. What does the future look like for Ahmadinejad?
The image below reflects the dynamics of interaction within Iran. The lines indicate the most likely level of aggresiveness in Iran's nuclear weapons development. The white line indicates the likely course if Iran were to be left to its own devices, removing the international influences and pressure.

  • The equilibrium is when the government of Iran will acheive its nationalist pride by making weapons grade fuel, but will stop short of obtaining enough to build a bomb.
  • The final image shows the computer-generated results for the projected winners and losers in Iranian politics. The obvious winners are the moneyed interests (whose influence is likely to get stronger with the state of the financial crisis). The "quietists" are likely to gain political clout as they perceive Iran moving politically in the wrong direction. It also appears that Ahmadinejad is the ultimate loser, as his already low influence continues to wane.
  • Comment: While Bruce Bueno de Mesquita offers here an interesting presentation and some interesting charts to advocate game theory, he provides little to no information about the actual process of his methodology.
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