Incentives

In medieval England, villages had common grazing land-the “commons”-where all villagers could graze their sheep. Each shepherd faced a decision: How many sheep should I graze? The logic was simple: Adding one more sheep: I get 100% of the profit Cost of overgrazing: Shared among all shepherds So every rational shepherd added more sheep. And more. And more. Until the commons was destroyed. Overgrazed. Barren. Worthless to everyone. This wasn’t malice. Each shepherd was acting rationally in their own self-interest. ...

Mechanism Design: Engineering Games with Desired Outcomes In 2012, Alvin Roth and Lloyd Shapley won the Nobel Prize in Economics for mechanism design - the art of reverse-engineering game theory. Instead of analyzing existing games, mechanism design asks: Can we design the rules to get the outcome we want? The result? Kidney exchange networks that save thousands of lives Spectrum auctions that raised $100+ billion for governments School choice systems that match students to schools fairly Voting systems that resist manipulation Mechanism design is game theory’s most powerful application - turning abstract mathematics into real-world systems that align incentives and produce efficient outcomes. ...

In the early 1900s, British colonial India faced a venomous problem: too many cobras slithering through the streets of Delhi. The British government, determined to reduce the cobra population, came up with what seemed like a brilliant solution-offer a bounty for every dead cobra brought in. Initially, the program worked. People killed cobras and collected their rewards. The cobra population appeared to decline. Success! Or so they thought. The Twist Enterprising locals quickly realized they could breed cobras specifically to kill them and collect the bounty. Why hunt dangerous snakes in the wild when you could farm them at home? ...