So far the debate on banker bonuses seems to have focused on two areas: the unfairness and inequality that the bonuses represent, and the value (or not) that they add to the businesses they run. The first represents the view of society as a whole, questioning whether anyone is worth a million-pound bonus on top of their million-pound salary. The second represents (or is supposed to represent) the view of the shareholders, who are putting it in perspective with the billion-pound profits of the banks they own.
However I think there is another equally valid perspective, namely that of the customers. Let’s see how well they’ve done there:
The price mechanism, like justice, is blind. It operates regardless of the nature of the produce or of the consumer or supplier. It works just as efficiently when it comes to drugs, prostitution and slavery as it does with groceries and leisure wear. The price that a paedophile pays to rape a child is just that needed to match the supply of enslaved children with the demand for such activities, regardless of our moral scruples. The price that an addict pays for a gram of heroin on the streets of London or Los Angeles is that needed to match the supply available from local dealers with the demand from local addicts, in just the same way as it is in the fish or fruit market, and the damage caused as a result to families and society is an externality in just the same way as the cost of cleaning our pavements is an externality to the chewing gum industry. 
One of the basic assumptions behind the free market model is that buyers are interested in consuming or using the goods itself and are valuing it in terms of the satisfaction that it will bring them, or the use to which the goods can be put. However that is not necessarily the case. The buyer may be a speculator who is only interested in buying the goods because he knows he can sell it on to someone else for a higher price and make a profit on the difference.
One basic assumption that underlies the libertarian model is that everyone involved in the market knows what everyone else is doing. Take, for example, a vegetable market. The customer approaches his selected greengrocer because he has already compared its prices with those of every other greengrocer in town. The model also assumes that every item on sale is equally fresh and equally desirable – in other words that the customer has all the information he needs if he is to truly compare like with like. Such a market, of course, exists only in our imagination. In practice, greengrocers sell all kinds of vegetables at all kinds of prices and our choice is governed by instinct as much as anything else. However we do assume that the vegetables on display are fresh and as described. These days, strict laws governing the sale of foodstuff mean we are safe to do so. Unfortunately that hasn’t always been the case.
The Tragedy of the Commons is a particular example of what are more generally called ‘externalities’ or ‘neighbourhood effects’. These appear whenever the costs or benefits taken into account by the participants in a transaction differ from the costs or benefits that are experienced by society as a whole as a result of the transaction.
Libertarians would have us believe that the free market is the only way to ensure that limited resources are exploited and distributed in an efficient manner, and that any attempt at control is doomed to failure because we are not capable of handling the huge number of variables involved in balancing supply and demand. Would that were true, but unfortunately free markets have inherent flaws which must be dealt with if we are to make use of resources in a way that is sustainable, equitable or even desirable.
Games Theory is the study of situations where two or more players interact in accordance with a set of rules, and in particular where such situations arise in our political and economic life. Surprisingly it is fairly recent, generally considered to date from 1928 when John von Neumann’s book Zur Theorie der Gesellschaftsspiele (‘On the Theory of Parlour Games’) was first published. This was followed in 1944 by 
which Neumann co-authored with Oskar Morgenstern.
