Communications of the ACM
Always Out of Balance
Credit: Gunnar Pippel
When John Nash won the Nobel Prize in economics in 1994 for his contribution to game theory, it was for an elegant theorem. Nash had shown that in any situation where two or more people were competing, there would always be an equilibrium state in which no player could do better than he was already doing. That theorem has since been used to model all sorts of competitive systems, from markets to nuclear strategy to living creatures competing for finite resources.
"In some sense, it started not just game theory, but also modern economics," says Christos Papadimitriou, a professor of computer science at Columbia University. Nash's idea gave economists the ability to create hypotheses about market design, for instance. They could now ask what happened when a market reached equilibrium.
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