WORLD-RENOWNED game theorist David Yeung Wing-kay was the only Hong Kong scholar to join the recent International Congress of Mathematicians, where Nobel laureate John Nash was among the participants. Professor Yeung is convinced society would be better off if everyone understood the secrets of game theory and applied them to life. The director of the Centre of Game Theory at Hong Kong Baptist University thinks the penny-stocks fiasco could have been avoided, and regional disputes in places such as the Middle East could be eased, if those involved made decisions after a thorough assessment of how different parties will react. Only in rare situations, Professor Yeung maintains, does life become a zero-sum game, in which one can only gain at the expense of another. 'In many cases, from game theorists' point of view, we can pre-empt some unfortunate things from happening . . . if more people were equipped with game theory, we would be in a better society,' he said. Game theory, which dates back to the Roman Empire and was used in ancient China, is the study of decision-making in an interactive environment. The field now draws on mathematics, operational research, engineering, management science, biology, economics, political science and other disciplines. 'It's a study of how our actions will affect other people and how others' actions will have a bearing on us . . . Also, in game theory, we try to avoid time inconsistency, where we act in a certain way and after a while, we regret our action. 'We try to set up a time-consistent strategy so that we won't have anything to regret later . . . Knowing game theory will not make you rich, but it will make sure you won't move into a situation that gets you into trouble.' Modern game theory has been adopted in financial markets, environmental studies, public policy-making, conflict resolution and peace negotiations. 'From a mathematical point of view, real life is very complicated. We have to admit we are still very much behind. It's much easier to solve problems in physics than problems in economics or decision-making,' Professor Yeung said. A University of Hong Kong graduate in economics and statistics, Professor Yeung received a doctorate in Differential Game Theory at St Petersburg State University. He joined Baptist University in 1999 and became head of its game theory centre in 2000. The centre was the first of its kind in Hong Kong. In August, Professor Yeung was awarded an honorary professorship at Qingdao University, along with Nobel laureates Reinhard Selten and Nash, whose life was featured in the film A Beautiful Mind. Professor Yeung was invited to give a lecture at the world's most prestigious international meeting for mathematicians, the International Congress of Mathematics, which was held in Qingdao this year. It is held every four years and this was the first time China played host. In view of the advent of globalisation and advances in communications, Professor Yeung maintains there is a greater need for strategic decision-making. 'Interactions happen almost every minute, if not second. Behaving rationally and strategically is very important. There is a greater need for decision-makers to go to game theory to find answers,' he said. 'Politicians have ideals. When one pursues certain action, people will react to that. What makes things complicated is that there will be an adjustment process. 'Take the penny-stocks case. Policy-makers should have taken into consideration the reaction of the public, which was completely out of their control. There may be very good intentions behind their policies, but reactions from firms result in disaster before the policies can be implemented. 'Game theory would tell us that you have to listen to what others say, and calculate how they will seek to optimise their interests and what kind of action they will take,' he said. The penny-stocks fiasco in July was sparked by a government proposal to delist stocks trading below 50 cents. The immediate result was panic-selling in the market. 'Having a game theorist in some of the policy-making bodies would be a good idea. We may not be able to solve all problems, but we will be able to give advance warning when we ought not to do something because we do not know what will happen,' he said. Game theory has not been widely applied in the past because mathematicians have not had the answers to all of life's problems. 'Yes, there is greater uncertainty in real life. There is no way we can know the future . . . But if we know more about the pattern of occurrences, it gives us more information about foreseeable events. If we are able to do so, we won't regret the decisions that we make.' Chris Yeung is the Post's Editor-at-Large
