I’ve seen The Shawshank Redemption way too many times. Wayyyyy-way-wayyyyy too many times. You think I care? All I know is that it’s an all-time classic and I’ll continue to flip to it whenever I see it on the TV guide. Has there ever been a more likeable convicted murderer than Morgan Freeman’s character Red? I certainly can’t think of one.
Since I’d like to actively try and avoid turning this into a 10 000 word paean on the movie’s greatness, I’ll do a quick summary only and then jump right into our main topic. Before doing so though I suppose I should issue a #SPOILERALERT, although seriously if you haven’t seen it by now you should probably leave the public library where you’re reading this blog from and go back to your home in Inner Mongolia. Okay, let’s proceed.
Our main guy Andy Dufresne (Du-Frain, and make sure you say it like Morgan Freeman does) spends most of the movie locked up in Shawshank Prison for murdering his wife and lover, a crime for which he is innocent of but convicted for nevertheless. Fast forward to the end of the film and he is in Zihuatanejo, Mexico, living the Pacific Coast dream and rehashing fun stories from the clink with his old pal Red over some pina coladas. So quite a change in fortune.
How did he get from A to B? By escaping of course! The movie would’ve been quite anti-climatic if the prison just decided to release him early. In fact, The entire story builds towards the escape, and its success validates the central theme of the film – hope. And what fortunate escape it is! Here’s the YouTube clip for those who have forgotten how he did it.
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A true economist thinks in probabilities and adaptive strategies. Actually, everybody thinks this way, but in economics you are taught to observe the process through Bayesian Game Theory. Our two main players in this game are Norton (the prison warden) and Andy. Norton is a fraud who runs a corrupt business and knowingly employs brutal, violent guards. Not a cool dude, in other words. On the flip side Andy has a background in banking and finance, so after learning about this Norton decides to make him his own personal accountant and has him take care of his dirty money. Some time passes and Andy finds out there’s a guy in the prison who knows of his innocence. He goes to Norton with this information, Norton refuses to acknowledge it as credible, and as a result Andy calls him some rated PG names. As a totally appropriate response, Norton proceeds to kill the informed prisoner and throws Andy in solitary confinement for two months, a power trip so big I’m sure Ferguson police officers can immediately relate. Norton wins this round, but the game far from over.
Let’s take a step back and look at this from Norton’s perspective. What are the odds of a prisoner escaping from Shawshank? Maybe 0.01%? Something around there I would imagine. The movie takes place in the early-mid twentieth century so the security system probably has a few more holes in it than it would today. But still, 0.01% is very low. So when Andy insults Norton in front of him, Norton has no problem cracking the whip on him. After all, what’s Andy gonna do, escape? Call or write to a reporter about the illegal activity in and around the prison’s operations? Even if Andy did that, he’d have no actual proof to give to reporter X, and why would they believe a convicted murderer? Norton simply examined the evidence and decided that since Andy had no alternative strategy but to be submissive, Norton could punish him relentlessly.
CLASSIC case of asymmetric information! Andy does actually have some options. You see, he was very conveniently placed on the far end of the prison hall, meaning one side of his cell actually backs onto a closed off room with a sewer running through it that leads outside. This stroke of good fortune increases the chance of escape to 0.1%, although he obviously still has to find a way to get to that room. But now we have to factor in that Andy is a very smart dude who demonstrates throughout the movie his ability to out-think others and get.things.done. So of course he figures out a way to secretly chip away at the wall in his room using a little rock hammer, and makes a hole large enough for him to get to the sewer. Suddenly that 0.1% probability of escaping just jumped substantially. It is important to know that Andy had accomplished all this before his argument with the warden.
Norton doesn’t know any of this. If he had suspected that there might be a chance Andy could conceivably escape I doubt he would have levied such a severe punishment. At that point you wouldn’t want to give your prisoner any extra incentive to act quickly, especially when that guy knows all your dirty secrets. Norton is not only unaware of the options Andy has at his disposal, but he’s also exacerbated the problem by making him a vengeful prisoner. You can blame Norton on two fronts; he should have never punished Andy the way he did, and he should have realized Andy’s room was in a vulnerable location.
Was Norton overconfident? Definitely. I’m guessing nobody had ever escaped Shawshank before, so he figured it was impossible. In fact, I know nobody had ever escaped Shawshank before because it doesn’t actually exist. Regardless, one of the fundamental flaws of forecasting in any research field is the inability to accurately determine the likelihood of an event occurring that has never before happened. 9/11 is the best example of this. The US Agencies were overconfident in their ability to prevent a domestic attack and consequently ignored the many warning signs that were present. We are obviously talking about two completely different scenarios – one is a real life tragedy and one is a fictional story – but the problem of information misuse and/or disregard is the same.
Alright, let’s summarize the game so far. Norton is faced with a decision of either letting Andy off easy or punishing him severely. Andy is faced with a decision of trying to escape and ratting out Norton for his crimes, trying to escape and not ratting, or not trying to escape at all. Norton makes the first move. If he chooses to punish Andy and Andy escapes, Norton is in for a world of hurt. But he believes that Andy’s chance of escaping is virtually non-existent and therefore opts to punish him. It’s clear what Andy wants to do, but he still has to weigh the probabilities of each option with their potential reward/punishment. Given that he already knows Norton has chosen to serve him up with two months of solitary and a lifetime supply of condescending Colonel Jessup type speeches, he recognizes that if he proceeds to escape and rat on Norton, he would gain the maximum possible happiness utility (10/10). If he escapes but doesn’t rat out Norton he gains 8 utility points. If he doesn’t escape he earns 0 utility. Conversely, if he escapes but gets caught he gets -4 utility (because his prison term becomes even more painful than before). If he is caught both escaping AND trying to screw over Norton, he gets -5 utility (and probably a year of solitary or something ridiculous like that).
Based on those numbers I made up, Andy would require the probability of a successful escape to be greater than 33.33% in order to choose the “escape and rat” option. That’s a really high number – I mean, a lot can go wrong in a prison escape – but it’s not that unrealistic either. After all, his motivation is extremely high, and combining that with his high IQ level it’s safe to say he wouldn’t risk an attempted escape unless he was very confident he could pull it off.
It’s also safe to say the Andy is risk loving at this particular moment, and we can use prospect theory to explain why. When you have little to lose and a lot to gain you are willing to take more risks. It’s why your favourite sports team plays more aggressive, or why you get more reckless when you’re low on poker chips. The gain from success is bigger than the loss from failure. This is also why I assigned those utility scores the way I did.
In the end Andy gets both his escape and his revenge on Norton, who commits suicide after discovering that there’s a warrant for his arrest courtesy of Andy’s leaked information. Had Norton chosen to let our protagonist off easy in the first stage of the game, Andy wouldn’t have ratted on him (he said as much in the film), and Norton’s utility wouldn’t have experienced the tragic beatdown it did. In essence, his lack of information cost him his life. Andy won the game.
What’s the moral of the story? Information asymmetry can cause major problems in strategic decision making, and can be made even worse when the person with less information is the one making the first move. The other moral is that The Shawshank Redemption is a fantastic film and anyone who hasn’t seen it or doesn’t like it should be thrown in jail. In fact, when I become Prime Minister I am going to make that a law.
Go ahead and weigh the probabilities of that happening, it’s your move.
The Curious Econ 