Why game theory will be nothing but a footnote in the history of social science

30 September, 2017 at 12:35 | Posted in Economics | Leave a comment

Nash equilibrium has since it was introduced back in the 50’s come to be the standard solution concept used by game theorists. The justification for its use has mainly built on dubious and contentious assumptions like ‘common knowledge’ and individuals exclusively identified as instrumentally rational. And as if that wasn’t enough, one actually, to ‘save’ the Holy Equilibrium Grail, has had to further make the ridiculously unreal assumption that those individuals have ‘consistently aligned beliefs’ — effectively treating different individuals as incarnations of the microfoundationalist ‘representative agent.’

In the beginning — in the 50’s and 60’s — hopes were high that game theory would enhance our possibilities of understanding/explaining the behaviour of interacting actors in non-parametric settings. And this is where we ended up! A sad story, indeed, showing the limits of methodological individualism and instrumental rationality.

Why not give up on the Nash concept altogether? Why not give up the vain dream of trying to understand social interaction by reducing it to something that can be analyzed within a grotesquely unreal model of instrumentally interacting identical robot imitations?

We believe that a variety of contributory factors can be identified …

gaIt is possible that the strange philosophical moorings of neoclassical economics and game theory have played a part. They are strange in at least two respects. The first is a kind of amnesia or lobotomy which the discipline seems to have suffered regarding most things philosophical during the postwar period … The second is the utilitarian historical roots of modern economics … Thirdly, the sociology of the discipline may provide further clues … All academics have fought their corner in battles over resources and they always use the special qualities of their discipline as ammunition in one way or another. Thus one might explain in functionalist terms the mystifying attachments of economics and game theory to Nash.

Half a century ago there was​ widespread hopes game theory would provide a unified theory of all social science. Today it has become obvious those hopes did not materialize. This ought to come as no surprise. Reductionist and atomistic models of social interaction — such as the ones neoclassical mainstream economics is founded on — can never deliver good building blocks for a realist and relevant social science.

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