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“The  only  thing  greater  than  the  power  of  the  mind  is  the  courage  of  the  heart.”  ―  John  Nash  

A Beautiful Mind Indeed

Vol.  III,  No.  27,  10  July  2015  

In   May   2015,   noted   mathematician   John   Nash   died   in   a   car   crash.   He   had   just   returned   from   Norway,  
where   he   received   the   prestigious   Abel   Prize   for   Mathematics.   Nash’s   work   on   Game   Theory,   for  
which  he  got  the  Economics  Nobel  in  1994  —  he  is  the  only  person  to  have  won  both  honours  —  is  
probably  his  best  known.    
One   definition   of   game   theory   describes   it   as   “the   study   of   mathematical   models   of   conflict   and  
cooperation  between  intelligent  rational  decision-­‐makers”.  A  much  simpler  way  of  saying  this  would  
be   in   terms   of   a   zero   sum   or   conflict   games   where   one   player’s   gain   is   matched   exactly   by   the   other’s  
loss.   This   point   of   exact   match   is   called   the   Nash   Equilibrium.   Nash’s   work   is   specific   enough   to  
generate   meaningful   results   and   analysis,   yet   general   enough   to   be   extended   and   applied   to   a   variety  
of  disciplines  —  biology,  economics,  defense  studies  and  politics,  for  instance.  
The   applications   of   Nash   equilibrium   are   infinite.   For   instance,   some   experts   in   India   have   noted   that  
today,   private   capital   seems   to   be   waiting   for   the   investment   cycle   to   be   kick   started   by   the  
government  before  putting  in  their  own  money.  This  situation  could  be  modeled  as  a  non-­‐cooperative  
game  between  two  potential  investors,  where  the  benefits  of  investment  are  only  realised  if  both  sink  
in   their   money.   Another   example   could   be   that   of   a   product   market,   in   which   a   number   of   firms  
compete  for  business.  We  could  also  model  the  global  climate  change  discussions  between  developed  
and   developing   countries   on   this   concept.   Or   on   the   oil   production   and   price   tug   of   war   between  
OPEC   and   American   shale   gas   producers.   Another   application   of   the   Game   theory   is   the   current  
bankruptcy  crisis  faced  by  Greece.  On  one  hand  is  a  possible  Greek  exit  from  the  Eurozone,  and  on  the  
other  are  the  painful  and  protracted  repeated  bailouts  by  the  rest  of  Europe.    
Game  theory  discounts  the  role  of  irrational  behavior  in  forecasting  an  outcome,  instead  contending  
that  a  rational  actor  will  follow  the  rules  of  the  game.  Of  course,  the  challenge  is  fitting  a  real  world  
decision-­‐making   process   into   a   system   to   define   the   game.   Such   a   process   is   never   fully   accurate,   and  
it  is  nearly  impossible  to  account  for  every  variable  at  play.  Nevertheless,  Nash’s  work  has  provided  
us   with   a   sounder   and   more   cogent   method   than   ever   before,   to   understand   the   complex   facets   of  
global  events.  
R.I.P.,  John  Nash,  a  truly  beautiful  mind  and  a  courageous  heart.  

Written  by  :-­‐  Anoop  Ohri  

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