WHAT ACCOUNTS FOR the wide spectrum of poverty and prosperity in the world today? This is arguably the most important question in the social sciences, but it has also proven to be one of the most difficult. Many books written about economic development contain a plethora of macroeconomic statistics that document the widening span of the economic chasm between rich and poor. This is not one of those books. There are relatively few statistics in it. You will not find many references here to GDP, macroeconomic growth rates, inequality coefficients, or statistics about hyperinflation. This book addresses this question not by reexamining the statistics on world poverty or looking at the successes, failures, or potential of grand development schemes. Instead, it examines how patterns of human interaction form the basis for poverty and prosperity.

Game theory is a formal structure used to understand human interaction. Because human interaction is both frequent and desirable for most of us, game theory covers a lot of ground: Games occur in social relationships, during market exchange, in the fulfillment of contracts, in the use of environmental resources, in educational and technology choices, in politics, and myriad other aspects of everyday life. By analyzing human interaction in a formal structure, game theory can make predictions about how people will behave and the consequences of their behavior. This makes game theory a powerful tool. It can also give us insight into difficult questions, such as why some countries have become rich and others remain poor.