&#91FOUNTAIN&#93The games they play

Mathematician John Nash, whose life was depicted in the movie a “Beautiful Mind,” introduced a new theory in 1950 in his doctoral thesis on noncooperative games and was awarded the Nobel Memorial Prize in Economics in 1994. Negotiations between the government and labor unions are good examples of noncooperative games. Both parties play their hand immediately, based on their model of the other’s behavior.
In the United States, the Reagan administration announced in August 1981 that 13,000 air traffic controllers who had taken part in labor strike for a pay raise and shorter work hours had to return to their jobs in 48 hours, otherwise they would be fired. Some of them ignored the announcement and continued the strike. Mr. Reagan kept his promise and fired 10,000 air traffic controllers, mobilizing military personnel to take their place. The 10,000 controllers fired accounted for 70 percent of all controllers in the United States at that time.
A similar case happened in Britain in 1984. British mine workers went on strike against the government’s restructuring plan for the coal industry. Margaret Thatcher, Britain’s prime minister at the time, considered this action illegal, saying that “laws should not be suppressed by theory of riot.” The mine workers who went on strike thought the Thatcher government would compromise with them, however their hopes were harshly dashed. They had to give up on what they demanded.
In terms of economy, it would be more favorable for labor unions to give up going on strike if, as part of their model of government behavior, they considered the government’s threat of strong reaction to illegal strikes as reliable. However, the government keeps on compromising with labor unions, reinforcing their behavior.
Jung Kab-young, a Yonsei University professor, described this situation as a “malfunctioning traffic signal,” In other words, if the government shows consistently certain traffic signs to labor unions, negotiations can be easily balanced; however, inconsistent traffic signs may cause traffic accidents.
I am certain that the government will take strong action on illegal labor strikes.
How the government signals its intentions for a hardline to solve labor issues and how labor will react remain to be seen.

by Lee Se-jeong

The writer is deputy economic news editor of the JoongAng Ilbo.