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International Monetary Fund. External Relations Dept.

The cool, logical thinking of economics would at first glance seem as far removed from the hot emotions of hatred and racism as it can get. But think again. According to Professor Edward Glaeser of Harvard University, politicians often decide to spread hate-creating stories about a group they wish to exclude from state spending in order to discredit opponents whose policies would benefit that group. According to this logic, egalitarians may foment hatred against rich minorities, whereas redistribution opponents may seek to build hatred against poor minorities. Glaeser, who presented his thoughts at a recent IMF seminar, even thinks that economics can help explain hatred of blacks in the U.S. South, the genocide of Jews, and the recent surge of anti-Americanism in the Arab world. “An economic model of hatred can use the economic focus on incentives and equilibrium to create predictions about where we should expect to see outbreaks of hatred,” he writes.

International Monetary Fund

ANYONE WHO HAS HAD to make a strategic decision taking into account what others will do has used game theory. Think of a game of chess. The outcome of the game depends not only on one participant’s move, but also on the actions of the opponent. When choosing a course of action—in other words, a “strategy”—a player must take into account the opponent’s choices. But the opponent’s choices in turn are based on thinking about the course of action the player might take. Game theory studies this interdependent decision making and identifies the optimal strategy—that is, the best course of action—for each player in response to the actions of others and how this leads to an equilibrium outcome, in which no players have a reason to change their strategy.