A Beautiful Mind Had it Right – Nash’s Theory still applies today

One of my favorite Russell Crowe movies is “A Beautiful Mind” directed by Ron Howard about the schizophrenic Ph.D. in economics, John Nash. If you saw the movie, you know that Nash won the Nobel Prize in Economic Science for his theory which became known as “Nash Equilibrium” that was used in game theory, economic development and other areas. In short it was all about maximizing everyone’s gain. From Wikipedia, this example might help define what Nash’s theory was all about:

“Stated simply, Amy and Will are in Nash equilibrium if Amy is making the best decision she can, taking into account Will’s decision, and Will is making the best decision he can, taking into account Amy’s decision. Likewise, a group of players are in Nash equilibrium if each one is making the best decision that he or she can, taking into account the decisions of the others in the game.”

The reason I raise is this is that we can all benefit more if we work with each other rather than against. If we all try to win the game, whatever that is, we will actually end up in a collective lesser state. This is a key reason why collaboration is vital to the success of most endeavors, including and especially politics. But, let me use a real example of how a region can benefit more economically through collective partnering under Nash Equilibrium.

In Charlotte, North Carolina, we have a terrific new “transmodal distribution facility” that is near the airport. The facility is adjacent to and incorporates railroad train tracks in the distribution process. It is also very conveniently located to three interstates (I-85, I-77 and I-485) and a fourth four lane highway (US 321) which connects to I-40 about forty miles away. If you know your North Carolina geography, you will know that Charlotte is right on the border with South Carolina and several towns in SC are actually included in the Metro Charlotte area.

A key reason for its success is more than the rail, highway and air access. Charlotte is also a convenient driving distance from ports in Charleston, South Carolina, Wilmington, North Carolina, Savannah, Georgia and Jacksonville, Florida. With the deepening of the Panama Canal set to be complete in 2015, bigger ships can sail fromĀ Asia-Pacific (China, Vietnam, Indonesia, Japan, etc.). Yet, unless these ports are dredged to become deeper, the bigger ships cannot enter the harbors there and will sail past. Activity has begun in various stages, but here is where Nash Equilibrium should come to fruition.

The states of North and South Carolina (and Florida and Georgia) should work collectively along with business and the Federal government to deepen all ports noted above. We will all benefit more greatly if we invest together. This would be true on other economic investments where we should work less at cross purposes and compete as a region. I recognize there have been pockets of success where this has been done, but to me, with the significant cost of dredging these harbors and the stalemate in fighting in Washington where Congress is moving money around to fund a very limited transportation budget for infrastructure, this a keen example of why we must work together to benefit more.

Former Transportation Secretary Ray LaHood and Former Pennsylvania Governor Ed Rendell have been promoting a bipartisanĀ investment in our infrastructure, each representing the major political parties. LaHood said this is the best jobs program we could possibly have. And, as I have said before, borrowing money to invest in assets, is different from borrowing money for operations. This is where we need to spend our money as the collective return on investment is huge.

So, to the state legislatures and Congress, let’s get with it and work to invest in America’s ports and roads. As Rendell said, if we don’t deepen our ports, the ships will sail right by us to Canada. John Nash indeed had a beautiful mind. We should follow his direction to maximize our collective gain.