Invisible Hand Effect in an Evolutionary Minority Game Model

TL;DR

This study demonstrates that in an evolutionary minority game, selfish agents using genetic crossover can collectively reach optimal societal performance, illustrating an 'Invisible Hand' effect similar to free market dynamics.

Contribution

It introduces an evolutionary minority game model showing how selfish strategies can lead to societal optimization under ideal conditions.

Findings

Evolutionary agents achieve optimal societal performance.

Mixed adaptive strategies prevent reaching optimal society state.

Cartel formation among agents hampers societal efficiency.

Abstract

In this paper we study the properties of a Minority Game with evolution realized by using genetic crossover to modify fixed-length decision-making strategies of agents. Although the agents in this evolutionary game act selfishly by trying to maximize their own performances only, it turns out that the whole society will eventually be rewarded optimally. This "Invisible Hand" effect is what Adam Smith over two centuries ago expected to take place in the context of free market mechanism. However, this behaviour of the society of agents is realized only under idealized conditions, where all agents are utilizing the same efficient evolutionary mechanism. If on the other hand part of the agents are adaptive, but not evolutionary, the system does not reach optimum performance, which is also the case if part of the evolutionary agents form a uniformly acting "cartel".