The most common heuristic used in economics is not coincidentally entitled the ‘prisoner’s dilemma’. Several classical economists saw in the social phenomena of crime and punishment an obvious demonstration of the principles of economics. Through changes in the criminal justice system society could deter criminals, thus ridding itself of the baneful costs of crime. Adam Smith (1762) explained the most basic choice inherent to all social action. Men are confronted with the perpetual choice to either truck, barter and exchange—or rape, pillage and plunder. The prisoner’s dilemma is a modern and formal presentation of Smith’s profoundly subtle insight. The game’s namesake scenario describes two criminals so attracted by the personal rewards of defection that they forgo the higher social rewards of cooperation. Not only are the inmates in the narrative strategically pitted against one another, but so are all individuals constantly offered the short term rewards of taking to get ahead instead of trading.
Find the article at Erasmus Journal for Philosophy and Economics.