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. Nashs 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 players gain is matched exactly by the others
loss. This point of exact match is called the Nash Equilibrium. Nashs 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, Nashs 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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