The Prisoners' Dilemma (more information) may be familiar to many from television police dramas. Police arrest two or more people suspected of conspiring in a crime and question them individually, promising a much lighter sentence to the individual who first agrees to confess and testify against the others. If the suspects remained silent, then they would all escape any penalties, but each knows that the probability of such cooperation is low. The prudent course for any suspect S may well be to take the deal, since it is likely otherwise that one of the others will "break" first, resulting in a much stiffer penalty for S.

Similarly, each of the slaveholding cotton producers in our example is apt to suffer immediate adverse economic consequences if he or she is the first to replace slave labor with market labor. On the other hand, if all can agree to abolish the practice entirely, then no one of them will be suffer a particular market disadvantage, while all will share in the resultant increased economic prosperity. The same principle can be applied to many interventionist situations. Often, as we shall see in Section 5, particular parties derive immediate economic benefits from certain interventionist policies (e. g., subsidies to their own industries), but suffer far greater adverse effects from other such policies. All parties might realize their self-interests more effectively if they could arrive at a kind of "social contract" to abolish such policies in general, just as slaveholders might benefit from the society-wide abolition of slavery.