Tyler Cowen: evaluation

Transcript context

…It would tank. It would be almost nonexistent just because all of our economy depends on coordination, on people doing things that are in everyone’s interest if everyone does them the same way, beginning with money itself, with currency. Why do we accept a piece of paper in exchange for something of value? We know other people will accept it and give us something of value. Why do they do that? They know that still other people will. Everyone knows that everyone knows that money has value. That’s what gives it value, as long as they do. That can unravel when you have hyperinflation, or a bank run, or a currency attack. Political power. No government can have snipers on every rooftop and telescreens in every room surveilling you 24/7 with the Stasi ready to pounce on you if you break a law. A lot of our laws, a lot of recognition of authority, who’s the boss, depend on just common knowledge, namely, he’s the boss or she’s the boss. She gets her way because she knows I’ll obey. I’ll obey because I know she gets her way. For as long as that lasts, as long as that common knowledge lasts, you have structures of authority and reporting and power and responsibility. Again, since it depends on nothing but common expectations, it can unravel as when you have a big public demonstration where people see each other, seeing each other, seeing each other opposing the regime, and then the authority of the regime can evaporate. Surely there’s a difference between coordination and common knowledge. I think of common knowledge as an extremely recursive model that typically has an infinite number of loops. Most of the coordination that goes on in the real world is not like that. If I approach a traffic circle in Northern Virginia, I look at the other person, we trade glances. There’s a slight amount of recursion, but I doubt if it’s ever three loops. Maybe it’s one or two. We also have to slow down our speeds precisely because there are not an infinite number of loops. We coordinate. What percentage of the coordination in the real world is like the traffic circle example or other examples, and what percentage of it is due to actual common knowledge? Common knowledge, in the technical sense, does involve this infinite number of arbitrarily embedded beliefs about beliefs about beliefs. Thank you for introducing the title with the three dots, dot, dot, dot, because that’s what signals that common knowledge is not just when everyone knows that everyone knows, but when everyone knows that everyone knows that and so on. The answer to your puzzle — and I devote a chapter in the book to what common knowledge — could actually consist of, and I’m a psychologist, I’m not an economist, a mathematician, a game theorist, so foremost in my mind is what’s going on in someone’s head when they have common knowledge. You’re right. We couldn’t think through an infinite number of “I know that he knows” thoughts, and our mind starts to spin when we do three or four. Instead, common knowledge can be generated by something that is self-evident, that is conspicuous, that’s salient, that you can witness at the same time that you witness other people witnessing it and witnessing you witnessing it. That can grant common knowledge in a stroke. Now, it’s implicit common knowledge. One way of putting it is you have reason to believe that he knows that I know that he knows that I know that he knows, et cetera, even if you don’t literally believe it in the sense that that thought is consciously running through your mind. I think there’s a lot of interplay in human life between this recursive mentalizing, that is, thinking about other people thinking about other people, and the intuitive sense that something is out there, and therefore people do know that other people know it, even if you don’t have to consciously work that through. You gave the example of norms and laws, like who yields at an intersection. The eye contact, though, is crucial because I suggest that eye contact is an instant common knowledge generator. You’re looking at the part of the person looking at the part of you, looking at the part of them. You’ve got instant granting of common knowledge by the mere fact of making eye contact, which is why it’s so potent in human interaction and often in other species as well, where eye contact can be a potent signal. There are even species that can coordinate without literally having common knowledge. I give the example of the lowly coral, which presumably not only has no beliefs, but doesn’t even have a brain with which to have beliefs. Coral have a coordination problem. They’re stuck to the ocean floor. Their sperm have to meet another coral’s eggs and vice versa. They can’t spew eggs and sperm into the water 24/7. It would just be too metabolically expensive. What they do is they coordinate on the full moon. On the full moon or, depending on the species, a fixed number of days after the full moon, that’s the day where they all release their gametes into the water, which can then find each other. Of course, they don’t have common knowledge in knowing that the other will know.…

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