Home > Uncategorized > Game theory for humans with hearts

Game theory for humans with hearts

from Asad Zaman

The following is a slightly revised excerpt of Section 1.2 from my paper on “Empirical Evidence Against Utility Theory“ – Game theorists rule out Humans with hearts by assumption. The excerpt provides some empirical evidence (not needed by anyone except economists) that human actually do have hearts, and this actually affects their behavior! surprise, surprise!

The “Goeree-Holt Humans with Hearts” (GHHwH) Game: Conventional game theory operates under the assumption that both players (A-player labelled Aleena, and B-player labelled Babar) are heartless human beings. They have no emotions; rather, they are disembodied brains floating in vats. For more explanation and discussion, see “Homo Economics: Cold, Calculating, and Callous“. Below we discuss a game described in Goeree, Jacob K. and Charles A. Holt (2001). “Ten Little Treasures of Game Theory and Ten Intuitive Contradictions,” American Economic Review, vol. 91(5): 1402-1422. They do not provide a name for this game, so we will call it the GH Humans with Hearts game; it is a convenient way to prove the human beings do not behave like homo economicus. Furthermore, this assertion is not a surprise to anyone except economists, who are trained to think like economists. This means deep training in learning to model human behaviour as heartless, which blinds them to the complex realities of human behaviour.  read more

  1. September 7, 2019 at 7:26 pm

    I think the rise of game theory is quite sinister. The tendency to dehumanise people has all too often been a prelude to mass exploitation or even mass murder.

  2. September 7, 2019 at 11:45 pm

    Artificial intelligence via game theory-with-heart is capitalism’s final frontier; where no human has gone before. Beings with solar powered plastic breakdown molecules embedded in their protein molecules evolve into reproducible emotion-free consumer units increasing purchases at seven percent annually. Capitalist China ends up setting the example for faster and faster growth to infinity on a finite planet. US loses.

  3. Frank Salter
    September 8, 2019 at 9:42 am

    How many of the apparently irrational decisions made by humans are simply that they did not fully understand what the result would be.

    • September 8, 2019 at 10:14 am

      This post questions the concept of “rationality” as being purely selfish maximization – understanding outcomes is not at issue in the extremely simple game with complete certainty about outcomes

  4. Yoshinori Shiozawa
    September 8, 2019 at 3:07 pm

    There is already ample tradition of economics that does not assume (unbounded) rationality:

    (1) Modern Evolutionray Economics: An Overview
    https://www.amazon.com/Modern-Evolutionary-Economics-Richard-Nelson-ebook/dp/

    (2) Microfoundations for Evolutinary Economics
    https://www.researchgate.net/publication/334508762_Microfoundations_of_Evolutionary_Economics

    The range of validity of game theory is limited. I wonder why Asad had picked up this game. “That we cannot count on “maximization” of utility is well explored and established theoretically and empirically. See for example Chapter 1 of (2). Why do you rejoice with these banal findings?

    Utility theory is an already rejected version of behavioral psychology, although its origin is much older than the latter. Throw away such rubbish simply and finally. No need to add some more supplementary evidence. Economics concerns with society-wide interaction of human agents. It is something beyond individual psychology. You should consider rebuilding economics, not psychology.

    What we need is the program for rebuilding economics. (1) argues it.

    • Yoshinori Shiozawa
      September 9, 2019 at 2:16 pm

      A closing quotation mark was missing: Please read

      “That we cannot count on “maximization” of utility”

    • Rob
      September 12, 2019 at 10:32 am

      What is the harm of reducing the complexity of human motives to the simple one of greed? We have just seen that understanding human behavior in a very simple game requires taking into account resentment, gratitude, revenge, carelessness and reciprocity. Contrary to the reductionist economic views, a vast number of market transactions are based on motives other than greed. The widely recognized phenomenon of conspicuous consumption creates an externality and hence market failure which should be regulated – however economists fail to acknowledge the phenomenon because it requires motivations other than greed. An additional problem is that highlighting a single motive both legitimizes and encourages it: witness the “Greed is Good” maxim of Wall street. ~ Asad Zaman

      .

      The range of validity of game theory is limited. I wonder why Asad had picked up this game. “That we cannot count on “maximization” of utility is well explored and established theoretically and empirically…. Why do you rejoice with these banal findings? ~ Yoshinori Shiozawa

      .
      Shiozawa asks, “I wonder why Asad had picked up this game.” Note he overlooks on purpose and ignores the more substantive point of Asad’s post: that human relations and therefore the institutions and economic patterns they evolve are grounded in community, reciprocity, friendship, love, and moral and ethical motives that are important and do influence culture and society.
      .
      The key message is the problematic nature of reducing the complexity of human motives to the simple one of greed. Shiozawa’s question is simply a rhetorical device, a form of semantic negligence, for Asad makes the reason perfectly clear.
      .

      Even such purely academic theories as interpretations of human nature have profound practical consequences if disseminated widely enough. If we impress upon people that science has discovered that human beings are motivated only by the desire for material advantage, they will tend to live up to this expectation, and we shall have undermined their readiness to moved by impersonal ideals. By propagating the opposite view we might succeed in producing a larger number of idealists, but also help cynical exploiters to find easy victims. This specific issue, incidentally, is of immense actual importance, because it seems that the moral disorientation and fanatic nihilism which afflict modern youth have been stimulated by the popular brands of sociology and psychology [and economics] with their bias for overlooking the more inspiring achievements and focusing on the dismal average or even the subnormal. When, fraudulently basking in the glory of the exact sciences, the psychologists [, theoretical economists, etc.,] refuse to study anything but the most mechanical forms of behavior — often so mechanical that even rats have no chance to show their higher faculties — and then present their mostly trivial findings as the true picture of the human mind, they prompt people to regard themselves and others as automata, devoid of responsibility or worth, which can hardly remain without effect upon the tenor of social life. (Andreski 1973, 33-34, in Social Sciences as Sorcery)

      .

  5. Jan Milch
    September 8, 2019 at 3:12 pm

    “Myrdalian ex ante language would have saved the General Theory from describing the flow of investment and the flow of saving as identically, tautologically equal, and within the same discourse, treating their equality as a condition which may, or not, be fulfilled”
    G. L. S. Shackle,
    (Ex ante and ex post analysis has been propounded in the thirties by Gunnar Myrdal, who introduced it in this way : […] an important distinction exists between prospective and retrospective methods of calculating economic quantities such as incomes, savings, and investments; and […] a corresponding distinction of great theoretical importance must be drawn between two alternative methods of defining these quantities. Quantities defined in terms of measurements made at the end of the period in question are referred to as ex post; quantities defined in terms of action planned at the beginning of the period in question are referred to as ex ante. (Myrdal 1939: 46-7) Then, focusing attention on the relation between saving and investment, Myrdal argued that one may without any contradiction consider that, as they are made by separate agents, ex ante saving and investment decisions are not at parity in general while ex post saving and investment recorded in bookkeeping balance exactly:HODOLOCICAL ISSUE: EX ANTE AND EX POST ANALYSIS IRRELEVANT TO KEYNES’S THEORY OF EMPLOYMENT Claude Gnosi ” https://web.archive.org/web/20120907043449/http://www.csbancari.ch/pubblicazioni/RMElab/gnos.pdf

  6. Dave Raithel
  7. Dave Raithel
    September 8, 2019 at 3:32 pm

    https://philpapers.org/s/Edward%20F.%20McClennen One of my profs, and why I still find theory of games and rational choice and decision theory subjects which teach us things about ourselves.

    • Rob
      September 9, 2019 at 12:14 am

      There is no such thing as “initial equal distribution of primary social goods.” Pure fiction. Name one thing that we learn about ourselves through rational choice theory that we don’t already know without it.

    • Yoshinori Shiozawa
      September 9, 2019 at 8:30 pm

      Dave Raithel

      The following is what I have posted as comment to Lars Syll’s article
      Game theorists — people carried away by fictions July 7, 2019
      https://rwer.wordpress.com/2019/07/07/game-theorists-people-carried-away-by-fictions/#comments

      I believe my post does apply to Asad Zaman’s article. Dave can also understand why in some cases, game theory teaches us much. It is only necessary that any theory has its range of validity. Game theory’s range of validity is not sufficiently wide to be useful in the analysis of large system as big as a national or world economy.

      ******************************************************************

      My comment posted at July 8, 2019 at 4:28 am Reply

      Dear Lars is still trapped by the classical dichotomy between analytic and synthetic proposition theory. This theory is as old as Immanuel Kant and later developed by some Logical Positivists. It tells us sometimes something useful but often misses important points on our intellectual efforts to understand the world. We should remind that Kant and Logical Positivists are pholosophers before the notion of Bounded Rationality (and Complexity: added by me on 2019.9.9).

      Pure mathematical theory does not gives us any information about any concrete proposition whether it is true or not, but it gives us a method how to understand logical relations between propositions which may describe something about the real world. There is no better method than mathematics.

      Lars Syll >> Pure game theory does not give us any information at all about the real world.
      If Lars Syll argues within the classical dichotomy, he cannot explain why in some cases game theory could have provided and is still providing a powerful tool for analyzing and understanding some aspects of economic phenomena. Instead of inappropriate dichotomy between Pure and Applied game theory, it is better to contrast Small Games with Large Systems. When it is concerned with two-person or three-person game, game theory gives us a powerful tool.

      Indeed, thanks to game theory, we came to know much more concretely and clearly about (at least some aspects of) interactions between two (or at most three) persons than any philosophical reflections about them. However, game theory was almost useless in analyzing any large system like national economy or world economy. Except special aspects like industrial conflict between capital versus labor (this is a two-person game), game theory has nothing to say about economy, because it is a large system which most often comprises more than millions of people and thousands of firms. Game theory (except evolutionary game theory that is free from rational choices) are useless because strategic or opportunistic behaviors have no relevance in large systems. Large system has its own rules and institutions (like ownership, exchange and money) which generates and governs its working. Rationality (or optimal choice) has little to do with large systems like an economy.

      For more details see our new book “Microfoundations of Evolutionary Economics” from Springer (Ch. 1 and 2 in particular).

  8. Ken Zimmerman
    September 9, 2019 at 12:45 pm

    Widely used, though for the life of me I can’t understand why, Game Theory is commonly described as the process of modeling the strategic interactions between two or more players in a situation containing set rules and outcomes. While used in several disciplines, game theory is most notably used as a tool within the study of economics.

    The fundamental principles of game theory are the following:

    1. It is assumed that all the concerned people involved are rational. Rationality implies that every player is motivated by maximizing their own payoff. In a stricter sense, it implies that every player always maximizes their utility, thus being able to perfectly calculate the probabilistic result of every action.
    2. It is assumed that players want to maximize their payoffs or limit their losses.
    3. It is assumed that the payoffs listed includes the sum of all payoffs associated with the concerned outcome. For example, purchasing a new car.
    4. Although the number of players is theoretically infinite, most of the time the theory assumes two player games.
    Eleven economists have been awarded the Nobel prize for Economics for their contributions to and applications of Game Theory. John Maynard Smith was awarded the prestigious Crafoord Prize for the application of game theory to life sciences (evolutionary biology).

    As described by those who use game theory in social sciences (including economics), life sciences, and anthropology, game theory is used primarily to describe and model how human populations behave. Some researchers believe that by finding the equilibria of games they can predict how actual human populations will behave when confronted with situations analogous to the game being studied. This view of game theory has been criticized. It is argued that the assumptions made by game theorists are often violated when applied to everyday situations. Game theorists usually assume players act rationally, but in practice human behavior often deviates from this assumption. Game theorists respond by comparing their assumptions to those used in physics. Thus, while their assumptions do not always hold, they can treat game theory as a reasonable scientific ideal akin to the models used by physicists. In other words, game theory investigations are “theoretical constructs,” (e.g., in physics, gravity) that provide a full explanation of certain events even when the assumptions upon which the construct are based appear to be incorrect. The goal is to eventually get the assumptions correct. However, empirical work has shown that in some classic games, such as the centipede game, guess 2/3 of the average game, and the dictator game, people regularly do not play Nash equilibria. There is an ongoing debate regarding the importance of these experiments and whether the analysis of the experiments fully captures all aspects of the relevant situation. Experimental work in game theory goes by many names, experimental economics, behavioral economics, and behavioral game theory are several. For a recent discussion, see Colin F. Camerer, Behavioral Game Theory: Experiments in Strategic Interaction (2003).

    Some game theorists, following the work of John Maynard Smith and George R. Price, have turned to evolutionary game theory in order to resolve these issues. These models presume either no rationality or bounded rationality on the part of players. Despite the name, evolutionary game theory does not necessarily presume natural selection in the biological sense. Evolutionary game theory includes both biological as well as cultural evolution and models of individual learning (for example, fictitious play dynamics).

    The great danger when game theory is applied to human community and individual ways of life is that one or more interest groups with agendas will attempt to constitute those ways of life to be a fixed expression of the assumptions of the game. There is a great temptation to change game theory from descriptive to prescriptive. Some academics and researchers, particularly in banking and finance see game theory in just this way. As one way to fashion how people ought to behave. Since within the assumptions of game theory (inside the game, that is), a strategy, corresponding to a Nash equilibrium constitutes one’s best response to the actions of the other players – provided they are in (the same) Nash equilibrium – playing a strategy that is part of a Nash equilibrium seems appropriate. This normative use of game theory has come under considerable criticism.

    So, the question we must answer is: do the benefits of game theory’s applications in the social and behavioral sciences outweigh the many threats from game theory to human welfare, cultural development, and democratic decision making?

  9. September 16, 2019 at 8:59 pm

    Game Theory involves probabilities, for which one always needs to be careful about interpretation, lest the putative example actually violates some axiom.

    The ‘read more’ has “Game-theoretic analysis of this game is simple and straightforward. We work by backwards induction.” I don’t get this: I would appreciate a fuller reference.

    If we treat this as a two-person game then A’s maximin strategy will be to opt out when playing could give a relative loss. In effect, one assumes that the other players are probabilistic, but not that their play is in any sense optimal for them.

    There is a further common experimental problem: Whenever we set up a game we always have some doubt about whether the players’ aim is to end with the biggest amount (irrespective of what others gain), or to end with more than the other players.

    A possible confusion here is that if A thought that player B’s utility was independent of A’s gains then B would have a dominant strategy, so it would be common practice for A to ‘reduce’ the game to one in which they choose between playing for $10 or opting out for less. But, as experimental results seem to suggest, sometimes players seem not to be optimizing the thing that the experimenters think that they ‘should’ be.

    There are alternative strategies to maximin, but they all suffer from dependence on the other players’ aims.

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