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0 pointsabdullahkhalids2mo ago0 comments

Economic behavior is inherently game theoretic - agents take various actions and get some positive/negative reward as a result. Whether an agent's reward is positive or negative and of what magnitude, depends on the strategies employed by all agents. If some agents adopt new strategies, the reward calculus for everyone involved can completely change [1].

Over the past few centuries, countless new economic structures and strategies have been discovered and practiced. The rewards for the same action today and in the past can be completely different due to this.

So to me, if someone claimed more than a few decades ago that certain economic strategies and structures are good or bad, its simply not worth listening to them, unless someone reconfirms that the old finding still holds with the latest range of strategies. In that case, the credit and citation goes to that new someone, not the ghosts of the past.

[1] A good interactive demo https://ncase.me/trust/

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4 comments · 2 top-level

runarberg2mo ago· 2 in thread

> Economic behavior is inherently game theoretic.

Game theory is just math. As with any math, the calculations can all work out, but that says nothing of how it reflects nature. All you can say is that if the axioms are all true, then this is the necessary outcome. Look for string theory as a cautionary tale here.

Game theory assumes rational systems. But we have over 6 decades of behavior science which contradicts that fundamental assumption. Economic behavior is not necessarily rational, and subsequently it is not inherently game theoretic. You will find plenty of dogmatic, idealistic, superstitious, counter productive, etc. behaviors in an economy. You need psychology, and not just math, to describe the economics which happens in the real world.

abdullahkhalidsOP2mo ago

Game theory definitely does not require rational agents. Game theory says there are agents with certain specified strategies. Whether a strategy is rational from the underlying theory of value the agent adopts is completely separate matter. For example, its very common to study agents who always do one action no matter what others do or what the reward function is. Hard to call such actors rational, but that does not stop as from studying them.

runarberg2mo ago

When I said rational I meant it in this way. That rational agents will perform in a way in which maximizes their utility (or reward function). In psychology we call this theory homo economicus[1]. Regardless of theories of value, perceived rewards, and utilities, human beings have biases, prejudice, superstition, dogma, etc. etc. In real economies these non-strategic behaviors are consistently observed. This is why I say that economics are not just game theories, they are psychology, sociology, religion, as much as they are zero-sum games between actors.

> Hard to call such actors rational, but that does not stop as from studying them.

This is precisely why I object to your first post. “Shut up and do the math” has not done the wonders which string theorists had hoped. Game theory is a perfectly fine way to mathematics, and to study certain strategies, but it tells us nothing about the nature of economies in the real world.

https://en.wikipedia.org/wiki/Homo_economicus

Nevermark2mo ago

> if someone claimed more than a few decades ago that certain economic strategies and structures are good or bad

As you point out, it is all game theory.

But things that arrange for the game to be more beneficial to everyone, that align our interests more, deserve to be called "good", regardless of their inability to universally do so.

The latter would be an impossible bar for anything.

Where I find things frustrating, is when someone thinks because something is "good", it somehow becomes "enough". (Think, capitalized versions of different economic schools of thought.)

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