Home > The Economics Profession, Uncategorized > Is game theory nothing but a fable?

Is game theory nothing but a fable?

from Lars Syll

One of the world’s most renowned game theorists – Ariel Rubinstein – gives his — affirmative — answer in this interview (emphasis added):

What are the applications of game theory for real life?

That’s a central question: Is game theory useful in a concrete sense or not? Game theory is an area of economics that has enjoyed fantastic public relations. [John] Von Neumann [one of the founders of game theory] was not only a genius in mathematics, he was also a genius in public relations. The choice of the name “theory of games” was brilliant as a marketing device. The word “game” has friendly, enjoyable associations. It gives a good feeling to people. It reminds us of our childhood, of chess and checkers, of children’s games. The associations are very light, not heavy, even though you may be trying to deal with issues like nuclear deterrence. I think it’s a very tempting idea for people, that they can take something simple and apply it to situations that are very complicated, like the economic crisis or nuclear deterrence. But this is an illusion. Now my views, I have to say, are extreme compared to many of my colleagues. I believe that game theory is very interesting. I’ve spent a lot of my life thinking about it, but I don’t respect the claims that it has direct applications.

The analogy I sometimes give is from logic. Logic is a very interesting field in philosophy, or in mathematics. But I don’t think anybody has the illusion that logic helps people to be better performers in life. A good judge does not need to know logic. It may turn out to be useful – logic was useful in the development of the computer sciences, for example – but it’s not directly practical in the sense of helping you figure out how best to behave tomorrow, say in a debate with friends, or when analysing data that you get as a judge or a citizen or as a scientist.

In game theory, what we’re doing is saying, “Let’s try to abstract our thinking about strategic situations.” Game theorists are very good at abstracting some very complicated situations and putting some elements of the situations into a formal model. In general, my view about formal models is that a model is a fable. Game theory is about a collection of fables. Are fables useful or not? In some sense, you can say that they are useful, because good fables can give you some new insight into the world and allow you to think about a situation differently. But fables are not useful in the sense of giving you advice about what to do tomorrow, or how to reach an agreement between the West and Iran. The same is true about game theory.

In general, I would say there were too many claims made by game theoreticians about its relevance. Every book of game theory starts with “Game theory is very relevant to everything that you can imagine, and probably many things that you can’t imagine.” In my opinion that’s just a marketing device.

Why do it then?

…  What I’m opposing is the approach that says, in a practical situation, “OK, there are some very clever game theoreticians in the world, let’s ask them what to do.” I have not seen, in all my life, a single example where a game theorist could give advice, based on the theory, which was more useful than that of the layman.

Looking at the flipside, was there ever a situation in which you were pleasantly surprised at what game theory was able to deliver?

None. Not only none, but my point would be that categorically game theory cannot do it.

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  1. sergio
    September 23, 2013 at 4:49 pm

    Neoclassical economics is collection of fables which are absolutely inconsistent each other.
    Whole neoclassical economics is as useful in understanding reality as “scientific approach” to make cake. As if there was a book of recipes “How to make 1000 cakes” and a book “Cake:Scientific approach. Intermediate course”. The former one would contain recipes and colorful photos, while the latter one would contain equations, variables, such as temperature, quality of ingredients, speed of mixing, sweetness, graphs; laws; theorems, etc. The goal of that “science” is understanding of making efficient cake, using scientific methods.
    I do not mind if scientific approach how to make cake ever existed. Nonsense has right to exist. The problem that people are forced to make and eat “scientifically efficient cake” instead of 1000 different cakes. Forced to study how to make efficient cake in Universities, write academic papers, etc. And those “scientists do not want to formalize each of 1000 cakes.
    You may say that I exaggerate. But wait, household production function really exist in academics. How that nonsense is different from “scientific approach to make cake”?
    Absolutely the same can be said about “game theory”.

  2. nancy sutton
    September 23, 2013 at 5:13 pm

    I don’t think the link to the article goes to a ‘not here’ page :) Where is the original article? Thx

  3. September 23, 2013 at 5:48 pm
  4. September 23, 2013 at 5:48 pm

    Reblogged this on Parchment in the Fire.

  5. Oliver
    September 23, 2013 at 7:25 pm

    The link to the interview doesn’t work.

    • September 23, 2013 at 8:42 pm

      Broken link fixed.
      [http://fivebooks.com/interviews/ariel-rubinstein-on-game-theory]

      • Oliver
        September 23, 2013 at 9:26 pm

        Tranks!

  6. Oliver
    September 23, 2013 at 9:28 pm

    Whoops, thanks! Silly auto correct…

  7. Robert Locke
    September 24, 2013 at 7:41 am

    I read this post before. It amounts to overkill. The problem is not convincing people of the shortcoming of game theory and neo-classical economics but how to reform economics. We hear almost nothing about how to bring that about.

    • September 24, 2013 at 8:53 am

      Reform economy, banking sector and grow the economy by linking banker/bank taxes to the unemployment level/cost.
      Set the bank-levy at the annual cost of unemployment benefit.
      Set the top-rate of income tax for bankers at 10 times the percent unemployment level.
      This MUST force the banks to provide honestly priced finance to SMEs. Which must then grow SMEs therefore employ more people.
      This is a classic feedback mechanism, where banks are tied to the real economy, and thus are induced to grow it, rather than before, during and after the crisis were they are determined to rip as much money out of the real economy as possible with zero regard to the rest of humanity.

      bailoutswindle.com

    • sergio
      September 24, 2013 at 2:45 pm

      Seems like everyone who does not like current economics education just wait for the death of the last neoclassical economist.

  8. September 24, 2013 at 3:30 pm

    To me, there is no fundamental difference between a fable, a story, a model, a theory, science, fiction, religion, myth, etc. I group these all in the same (say) ‘taxa’—meaning they all are sets of symbols connected by a grammar and some correspondance of the symbols to ‘reality’ or empiriclly/experimentally observed/experienced phenomena. One can define ‘things’ as well as connect them ‘casually’ in time if desired (to describe temporal phenomena).

    In sum, they are ‘paradigms’.

    Also, paradigms can be written or expressed in many ways—in words, using various ‘tropes’ (see Hayden White’s ‘Metahistory’), in sound (e.g. music ) or visually (art, etc.) , even in touch (say braille). The language can be words, or formal logic, or mathematics, or a computer program—algorithm.

    Different strokes for different folks—some people may prefer to express themselves in a math type paper, or in a DSGE model, or by standing and screaming on a corner, or even through a war or terror attack.

    Math (and formal grammar (eg chomsky) and logic are non-empirical patterns which only concern themselves (like abstract art, say, as opposed to pictorial). Though, if some believe that the universe is really a computer or a represention of an axiomatic math or information system (eg seth lyod, john wheeler–it for bit,and others) then math itself is a story or fable though one with unfamiliar characters (e.g. the life of pi, or the very interesting number 3 (lou kauffman—knot theory, (f)laws of form).

    The line between fact and fantasy, or science and fables (or even fables and fiction and history). i dont think is very clear. One can easily write a set of words which most people would agree desribes some true set of affairs, but then gradually add some so it become a conspiracy theory. Did Jesus exist? Was the resurrection true? Is their global warming and was 911 an inside job? Does p=np?

    Also to me, the issue is ‘which paradigms or fables should I, and people in general or particular, learn or know? Protocols of the Elders of ZIon? Ron Paul’s theory of the constitution? The bible and 10 commandments? How to apply behavioral economics to dupe people into buying useless poisonous products and to swindle them out of their hard earned property? Category theory? The ‘common core’ curriculum now promoted for schools in the USA? US history as told by Howard Zinn or by Glen Beck?
    The song ‘Fables of Faubus’ by Mingus or the film Bedtime for Bonzo ( ronald reagen’s most famous role, though he had lesser hits in the White House)?

    I will admit for example that economist Dixit (who worked with Stiglitz) has some nice stories (eg on political polarization—why people believe different fables). I wonder how he defines neoclassical econ—I’d say he works in that area and also outside it (as it appears many of the greatest neoclassical economists also have done—-debreu, etc. I even came across a quote by Mundell (of RE) who said equilibruim is the most successful mistake in economics. Its right to be wrong.)

  9. Deniz Kellecioglu
    September 24, 2013 at 3:34 pm

    This is interesting – an insider confirming… Here is the correct link: http://fivebooks.com/interviews/ariel-rubinstein-on-game-theory

    In an unsual move, Rubenstein choose to conciously choose a misinformative title to an article with pretty much the same content as above.

    The article is titled “How game theory will solve the problems of the Euro Bloc and stop Iranian nukes”, but the ending paragraph goes: “Remember the title of the article? I tricked you. I was not sure that the title “Why game theory doesn’t solve the problems of the Euro Bloc and won’t stop Iranian nukes” would entice you to read the article, so I acted strategically and attached a misleading title. I did not get the idea for doing so from game theory.”

    Link: http://www.faz.net/aktuell/feuilleton/debatten/game-theory-how-game-theory-will-solve-the-problems-of-the-euro-bloc-and-stop-iranian-nukes-12130407.html

    It’s just weird. In the end, if the information is correct, it’s a dishonest move.

  10. September 26, 2013 at 2:12 pm

    actually i think thats a reasonable move (though rubinstein might want to concern himslef a bit with the conflict where he lives in the mideast, if he doesnt). a bit of a sense of humor and humility might be ok.
    i actually read that paper a while ago (its called ‘doing your homework’ which almost noone does, and i cant keep up tho i dont write lil op eds and such for the NYT or RWER or EcJ. ).

    one can remember thomas shelling was a big vietnam war proponent, using game theory, and i think the Harvard crew (macnmara or something ) were raised up to be social engineers and immersed in game theory at the time—for them, its just a game anyway since they werent going to fight.
    i think game theory especially in advanced form not practiced by most game theorists is cool, but i guess most people prefer the organized sports religion which only requires a couch and tv. ignorance is bliss.

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