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If you do what is best for yourself, the entire community will benefit.
According to the 18th century British economist Adam Smith, that’s one of the pillars of a healthy capitalist economy.
Smith’s magnum opus, The Wealth of Nations, was published in 1776 – the same year that the American colonies declared their independence and began what would become the world’s most intensive, long-term experiment in capitalism. What, after all, could be more American than, “I need to do what’s best for me”?
But there are good reasons for believing that Smith’s bedrock principle doesn’t always lead to the best outcomes.
In 1950, a shy mathematical genius named John Nash submitted his doctoral thesis at Princeton University. Its 28 pages were devoted to decision-making in complex situations, and specifically what came to be known as equilibrium theory.
Nash (1928-2015) pointed out that in contests and competitions there are points where people are maximally happy and minimally unhappy.
In other words, if a single player changes a strategy – goes a new and different way – the results will not be better. They won’t be better for that player and they won’t be better for anyone else. No improvement in happiness is possible.
That special “place” came to be known as the Nash Equilibrium. It’s a precious condition that can be described as The Best We Can Do. In theory it can always be found.
The secret is going beyond the impulse merely to do whatever works best for me. We must try to discern the decisions that the other players might make, and recognize that collaboration will bring about the best chance for a win/win/win.
It’s quite possible that economic theory ranks well down your list of Interesting Subjects to Pursue. And perhaps you decided long before your teenage years that math was for the birds, and that you would never really need to know about equations and fractions and trigonometry in order to live a decent and happy life.
If so, that might make you the last person on earth who would want to check out a Financial Times video that explains the Nash Equilibrium. But it’s only two-and-a-half minutes long. And it’s actually quite fascinating. Here you go: How Nash Equilibrium Changed Economics | FT World – YouTube
What Nash discovered and articulated is that self-interest is sometimes self-defeating.
If I am Company A and I make choices calculated to improve my bottom line – and why shouldn’t I? – it’s possible that I will stomp the competition and be rewarded. But if I am company A and I cooperate with my chief competitors at Company B, there’s often an even higher likelihood that I will be rewarded – if, that is, I am willing to let my competitors be blessed as much as I am.
It’s a startling concept. And it’s turned out to have an astonishing number of applications.
Today the Nash Equilibrium has surged out of the esoteric realm of theoretical mathematics and routinely helps inform conversations about global economics, computer science, game theory, biology, politics, military strategies, and, perhaps most significantly, the ongoing dream of world peace.
For his discovery of the “best we can do” equilibrium that bears his name, Nash won the 1992 Nobel Prize in Economics.
Now we can see why Sylvia Nasar’s book about his lifelong struggles and ultimate triumph over schizophrenia was entitled A Beautiful Mind. Ron Howard introduced Nash to an even wider audience by bringing the same story to the big screen. A Beautiful Mind, starring Russell Crowe, won the Academy Award for Best Picture in 2001.
According to Adam Smith, people always make decisions and choices that help themselves.
But self-interest is often self-defeating – a notion that clearly resonates with God’s Good News.
The apostle Paul urges us, “Rejoice with those who rejoice, and weep with those who weep” (Romans 12:15). Under the big top of God’s grace, somebody else’s victory becomes my victory, too. And somebody else’s tragedy is suddenly my opportunity to come alongside them as never before – an act of kindness and mercy that they’ll be prompted to give back when I’m the one who is hurting.
For those who follow Jesus, the “best we can do” can actually keep getting better and better.
The’s because the only limitation to Christ’s supply of love is our willingness to receive it and give it away.