Game theory is the economist's tool of choice to analyse what happens when two or more people have to negotiate, co-operate, compete or otherwise engage with each other. The essence of game theory is that each side would expect the other side to anticipate and respond to his likely actions.Game theory shows that there are times when irrationality (real or feigned) is a highly effective strategy. Someone who seems impervious to logic is someone who also gets his own way a lot. Consider, for example, toddlers, terrorists, bosses, dogs and the late Charles de Gaulle...by demonstrating a willingness to punish [a person or group] for no immediate personal gain, [the instigator] will gain in the long term anyway. Irrational perhaps, but rationally irrational.
I would love to see a modern Ken Arrow test this against our last eight years of foreign policy; or better yet predict the next administration's. Rationality may be the basis for most of our decisions, but when it increases a country's utility (whether it is real or its leaders think it will) to use something else to justify action (such as nationalist fervor or resource control), that course is sold to the public. If politicians don't embody rational irrationality, I don't know who does. Ah wait, yes I do.
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