IF I SUGGESTED that there was a link between, on the one hand, Gordon Brown’s commitment last week to ‘greater choice, greater competition, greater contestability and greater accountability’ in public services, and on the other MAD, the doctrine of mutually assured destruction that underpinned nuclear strategy during the Cold War, you might conclude that the strain of writing about management for a living had finally taken its toll.

But in that case, you haven’t been watching The Trap, Adam Curtis’s BBC2 three-parter on the genesis of our current ideas about freedom. If you had, you would know that the connection is the Nash Equilibrium – the creation of the eponymous mathematical genius John Nash, portrayed by Russell Crowe in the 2001 movie A Beautiful Mind

Nash was one of a group of theorists at the Rand Corporation, a military think- tank, who worked on game theory to model likely Russian responses in a nuclear confrontation. The equilibrium – for which Nash won a Nobel Prize – was a model showing that if every player acted with self-interest and suspicion and tried to outwit opponents, no one would have anything to gain from unilaterally changing strategy: the outcome would be a balance of terror.

If such thinking ‘worked’ in international relations (there was no nuclear war), could it apply to social and economic behaviour too? Yes, chorused a posse of US economists led by James Buchanan, who, borrowing from Adam Smith, eagerly theorised that the interplay of individuals rationally pursuing their own selfish interests could produce not warfare or anarchy, but the opposite: a dynamic, self-adjusting social order.

You can sense a near-religious fervour here. We already have a system – the free market – under which consumers can vote every day for what they want, instead of every five years as in politics! And that’s not only more democratic but also cheaper, because it means we can get rid of all those bureaucrats, who as we now know have just been (rationally) feathering their nests at our expense! There is no such thing as society! Order out of freedom: no wonder it looked like the end of history, the final triumph of democracy and free markets.

This in crude form is the ‘public choice’ theory that was at the heart of Thatcherism and Reagonomics, and that finds its echo in the Chancellor’s words last week. Still not convinced? Then we can telescope the connection into just one degree of separation.

One of the revelations of The Trap is that Alain Enthoven, the guru behind Thatcher’s internal market NHS reforms of the 1980s, was US assistant secretary for defence under President Johnson, and before that – one guess – nuclear and game theory strategist at the Rand Corporation. ‘Consumer choice, competition and strong incentives to modernise’: no, not Brown, but Enthoven’s NHS prescription for New Labour, circa 2000.

The Trapss bringing together of a number of strands, including psychiatry, medicine, politics, economics and management, is wide-ranging and controversial. But a virtue of its broad historical context is to bring into sharp focus otherwise-puzzling aspects of the agenda that New Labour has pursued since 1997 even more zealously than the Tories before them.

In this perspective, the assault on professionalism – teachers, doctors, lecturers, police – suddenly appears not an unfortunate byproduct of policy: it is the policy. Ministers want doctors and lecturers to be motivated by money and league tables. It is only by ridding them of pesky notions of doing good or knowing best that game theory and public choice can be made to work.

Left to themselves, humans obstinately refuse to be bad enough for these grotesque theories to come true. When Nash tested his system games on Rand secretaries, he was bemused that they insisted on co-operating instead of betraying each other every time. Only later did it transpire that Nash himself was suffering from paranoid schizophrenia, believing everyone, including work colleagues, was out to get him. In fact, it turns out that the only people to reliably exhibit the behaviour required to make the equations work are psychopaths and economists.

That sounds bleakly funny, until you consider the implications. As the economists’ experience suggests, self-interest can be learned. The trap is that this is what organisations in both public and private sectors, all based on the same reductive assumptions about human nature, are teaching us. Slowly but surely, organisations are remaking us in their own stunted and cynical image. If this extraordinary and unprecedented experiment ‘succeeds’, the ‘Stalinist’ epithets attached with such glee to Brown last week will also take on a new and more sinister meaning.

The third part of The Trap is on BBC2 at 9pm tonight.

The Observer, 25 March 2007