Greek Finance Minister Yanis Varoufakis addresses a news conference after an euro-zone finance ministers meeting in Brussels, Feb. 16, 2015. (Francois Lenoir/Reuters)

The ‘Melian Dialogue’ in Thucydides’s history of the war between the Athenians and the Peloponnesians (431-404 BCE) is one of the great set-pieces of power politics. In 416, an Athenian expedition arrived at the island of Melos and demanded its unconditional surrender. Thucydides takes the opportunity to stage a dramatic confrontation between two radically opposed views of the world. The Athenians reject all considerations of justice or morality, and insist on the right of the powerful to do what they wish while the weak simply have to submit. The Melians offer every argument they can think of to persuade them to adopt a different course. Why, they ask, can the Athenians not leave them in peace, since they’re too small to be a threat to anyone? Because, the Athenians answer, failing to crush them will make Athens look weak.

This confrontation – which doesn’t end well for the Melians – has been arguably the most influential part of Thucydides’s entire work. It is one of the founding texts of the ‘realist’ school of modern International Relations theory, and is of great interest to game theorists. It has been applied to pretty well any situation in which a major power confronts a smaller one: the United States and Iraq, Russia and Ukraine in the Crimea, and the negotiations between the ‘Troika’ of the European Commission, the European Central Bank and the IMF, and the Greek government about the latter’s debt repayments.

It’s this last example that makes it worthwhile to explore the implications of one discussion of the Melian Dialogue from the perspective of game theory – because the author is Yanis Varoufakis, currently the Greek Finance Minister but previously an academic economist with a specialized interest in this field. Varoufakis knows Thucydides well enough to offer his own translations of relevant passages of the work, though he takes an old-fashioned view of him as an accurate reporter of what was actually said between Athenians and Melians, rather than (as most modern readers would do) seeing him as a political theorist who invented the dialogue for his own analytical purposes. Varoufakis’s concern is with how real people behave in such situations, contrary to some of the expectations of abstract theory; perhaps it is natural for him to interpret the passage as a real high-stakes confrontation, rather than a staged debate between Thucydidean sock puppets.

Varoufakis does not actually attempt to ‘game’ the Melian Dialogue by replicating the historical situation or its most likely outcomes. Instead, he takes it as a starting-point, devising a game that gives one player a clear strategic advantage over the other. His key question is why the Melians abandoned instrumental arguments about power and advantage in favor of general moral claims about how those in a position of weakness ought to be treated leniently. Game theory is of course concerned with choices rather than arguments; Varoufakis equates this appeal to moral principle with a co-operative game strategy that aims for the outcome that brings the greatest benefit to both parties, rather than a selfish strategy that aims for personal benefit at the expense of the other player. The cooperative strategy produces the only mutually beneficial outcome in the game (in all other scenarios, at least one player ends up with a negative payoff), but it is undermined by the fear that your opponent may anticipate your co-operative choice and ‘cheat’ to collect the largest possible individual payoff at your expense, and by the temptation to cheat yourself.

Why would anyone choose the co-operative strategy (or the Melians’ moral argument) in such a situation? Varoufakis canvasses a number of possibilities, both instrumental (the subject has misread the situation, or accepts short-term disadvantage in the hope of long-term benefit, or is motivated by natural sympathy to others) and non-instrumental (a moral imperative that trumps rationality and disregards consequences, or an ancient Greek perspective that embeds morality and self-interest in the social order), or a hybrid form in which the players come to think of themselves as a single decision-making unit, rather than as opponents, and so rationally seek a mutually beneficial outcome.

One striking aspect of Varoufakis’s approach to game theory is that he does not stop at the theoretical level. Having constructed the game and proposed some possible explanations of why cooperative behavior might occur, he then got real people to play it to see how they responded in practice. In this game, there is no instrumental reason for anyone to choose the co-operative strategy – and yet people did. This was not the result of players getting to know their opponents or building up a relationship of trust or suspicion over time, as they faced different opponents in each round. Nor was it a matter of disposition, as the players switched roles in each game between the stronger and weaker side. It appears rather to be a function of their specific situation, so that the ‘rationality’ (in instrumental terms) of a player’s choices depended on whether or not s/he enjoyed the strategic advantage.

At this point Varoufakis offers a new hypothesis for such behavior: the argument of the Athenians in Thucydides’ account, that anyone in their position would act in exactly the same way. In other words, being in a position of strategic advantage promotes an inclination to cheat and privilege self-interest, whereas – and this is the reading that he emphasizes – being in a weaker strategic position leads players to “exhibit a quasi-moral urge to cooperate”.

The game was modified to test this hypothesis further, and re-run in several different formats. In each case, the stronger players were more inclined to choose an aggressive move even when expecting their opponent to be cooperative. More strikingly, the weaker players became more inclined to cooperate, even when the stronger players became less cooperative over time – and even when they expected their opponent to be uncooperative. Such ‘sacrificial cooperation’ is incomprehensible in conventional thinking. “It never makes sense to cooperate against an uncooperative opponent”, and yet time and again the players with a strategic disadvantage chose this course of action. The experimental subjects generated a social convention in which those in positions of advantage make use of it whereas those in positions of weakness tend towards moral rhetoric, actions – and expectations.

In other words, the Athenians were right. Of course, the Melians’ arguments failed because the Athenians’ goals aimed at ruthlessness rather than magnanimity, testifying to “the impotence of abstract morality against the logic of imperialism”. The experimental findings do not show that moral rhetoric and action are irrelevant, but they do show that choices are shaped by situation. This raises serious doubts about whether the Athenians could ever have been swayed by such arguments, and confirms their dismissive attitude towards the Melian claims as merely a sign of weakness. The one cause for optimism is that a moral disposition is not intrinsic but depends on social location, “in which case all that is needed to undo it is a re-designed social context”. That the Melians’ speech has resonated through history, Varoufakis argues, supports such a hope.

Does it? It’s impossible to quantify such a claim, but my impression of the history of readings of Thucydides is that the Athenians’ argument for the right of the stronger has resonated rather more than the arguments of their opponents. Of course, this may simply reflect the tendency for the greatest admirers of Thucydides to be in positions of relative advantage in the first place, so already inclined to accept such a view.

This is not a solely academic issue, given Varoufakis’s critical role in current negotiations about Greek bailouts and, potentially, the future of the euro. The relevance of his expertise in game theory has already been remarked upon in this context; for example, in a profile on Bloomberg.com by Carol Matlack, citing the economist James K. Galbraith:

What’s more, Varoufakis’s academic specialty is game theory, the study of strategic decision-making in situations where people with differing interests try to maximize their gains and minimize their losses. Varoufakis knows as much about this subject “as anyone on the planet,” Galbraith says. “He will be thinking more than a few steps ahead” in any interactions with the troika.

It’s worth emphasizing – as Varoufakis himself has done – how far his approach actually diverges from conventional game theory, seeking to question its assumptions. If he is indeed thinking several steps ahead, it is not in the belief that the choices of his negotiating partners are fully rational or that the range of possible outcomes is limited and predictable.

Because I spent many years during my previous life as an academic researching game theory, some commentators rushed to presume that as Greece’s new finance minister I was busily devising bluffs, stratagems and outside options, struggling to improve upon a weak hand. …The trouble with game theory, as I used to tell my students, is that it takes for granted the players’ motives.

This might to some extent be a bluff, as Henry Farrell implied: Varoufakis knows that it can sometimes be rational to appear irrational, including proclaiming a Kantian categorical imperative to do what is right regardless of the consequences for Greece and the rest of Europe – but that only works if everyone takes it at face value.

Varoufakis is caught in a dilemma where the only way that he can bargain effectively is by convincing people that he isn’t actually bargaining, but instead is stating ethical principles that he is prepared to stick to no matter what. Which means, conversely, that if he is just stating his sincere bottom line, people may mistakenly think that he is bluffing, and call him on it. Which is why he is writing this op-ed (although it will probably not solve the problem, since it is exactly the kind of op-ed that a canny bargainer inspired by Thomas Schelling’s take on game theory would be inclined to write).

This does suggest that Varoufakis’s account of the Melian Dialogue may offer some insight into the present negotiations. The basic situation is after all one of strategic imbalance, in which the weaker player will lose, to a greater or lesser degree, unless the stronger player chooses a cooperative strategy.

It is striking how far the Greek negotiating moves have tended to echo those discussed in Varoufakis’s article: the introduction of moral arguments (the impact of austerity on the Greek people, the issue of WWII reparations, accusations of neo-imperialism); attempts at bringing external pressure (or the fear of loss of reputation) to bear on the Germans from other European states; attempts at shifting the terms of the discussion to a cooperative search for mutually beneficial outcomes rather than a zero-sum game – alternating with warnings about the dire possibility of a mutually destructive outcome if the principles of European solidarity and justice for the weaker are abandoned. However, the efficacy of the latter approach is strictly limited; there is, in such a situation, no sense in cooperating with an uncooperative opponent, so the weaker side (which needs its opponents to adopt a cooperative strategy more than they need it to) cannot appear too uncompromising.

Varoufakis’s analysis indicates that the only real chance for the Melians and those in similar positions is a shift in their opponents’ motivation, so that they adopt a cooperative approach despite their clear strategic advantage. The experimental data shows that this can happen, and one might detect such a possibility in the Germans’ genuine adherence to principles of European solidarity – but it is alarmingly close to a reliance on mere hope, danger’s comforter (as the Athenians note in a passage of Thucydides that Varoufakis doesn’t mention).

The best chance for the Melians in fact seems to lie in the possibility of their opponents feeling unsure about how much strategic advantage they actually possess – not whether or not the Melians are weaker than them, but how far a mutually destructive outcome would damage them. The claim of the Melians that Athens would gain the enmity of all other states echoes Greek claims about the potential collapse of the euro zone; the Athenian argument that it’s better to show strength to keep their allies in line parallels the need for Germany to discourage other indebted euro-zone countries, such as Spain or Portugal, from similar insurrection.

One problem that the Melians/Greeks face in this situation is that their recourse to moralizing arguments is, according to Varoufakis’s analysis, a sign of weakness. Not only can their opponents easily dismiss such arguments, they can take them as confirmation of their strategic advantage, hence making it less likely that they will adopt a cooperative strategy – one might label this the Melian Dilemma. Still more alarming is the way his experimental data shows how those in the weaker position are inclined to adopt cooperative strategies even when they do not expect this to be reciprocated, as a function of their situation. Various commentators expressed surprise, at the conclusion of the last round of negotiations, that the Greeks had apparently given in, dropped most of their demands and accepted almost all the conditions demanded by the other side, without much of a fight. Varoufakis’s analysis suggests that this was entirely predictable: in practice still more than in theory, the strong exact what they can, and the weak have to endure it. This is not a cheerful conclusion for the Greek people …

Neville Morley is a professor of ancient history at the University of Bristol. He blogs about modern interpretations of Thucydides at The Sphinx Blog