Does Austrian Economics have any perspectives on game theory? I am curious because I have heard that it is related to economics.
From https://forum.freecapitalists.org/t/game-theory-in-economics/14157/3 :
Game theory is increasingly getting better*. For example, they model learning effects (rather than assume equilibrium). They still assume neoclassical “rationality” though.
I think research on “market” outcomes with regards to voting are a good example of where game theory is at. The boundaries are still set (laws), but within that framework the models allow for a lot of decentralization/chaos.
* I am basing this post on the game theory I had in college and a friend of mine doing a phd on rational voting (ahum). Maybe there are areas I overlook though…
“Older” AE, yes. Contemporary AE, no.
Oskar Morgenstern co-authored with John von Neumann on the foundational book “The Theory of Games and Economic Behaviour”.
Game theory does not use a praxeological foundation, but the concept of “utility maximization”:
(pg 8. sec 2.1.1)
I think that is what primarily divorces game theory from “reality” as we know it. I find the praxeological approach to economics better. That is the current method of the Austrian school and why I say that game theory isn’t really “contemporary” AE.
Game theory > Austrian economics.
Evolutionary game theory > classical game theory.
Can you explain why you think that?
shazam,
i guess it depends on how you define “Austrian Economics”. I can tell you this, there are certainly economists who identify themselves as Austrian that use game theory routinely in their research. The best example is Peter Leeson. Here is a good example of game theory in his work:
http://www.peterleeson.com/PSH.pdf
here, leeson uses game theory to explore how self-enforcing exchange can take place when there is social distance between individuals. the standard argument is that reputation and other mechanisms that make exchange possible in small groups break down as social distance increases. leeson argues that this need not always be the case.
C’mon. This is just begging for elaboration.
but the concept of “utility maximization”:
The current fad in econ; behavioural econ takes an issue with just this.
Taking issue with utility-maximization while endorsing a 100-year old faith in praxeology seems outrageous to me. All game theorists and economists are comfortable acknowledging their assumptions: they are actively exploring alternatives like bounded rationality and satisficing, questioning the scalar nature of Kaldor-Hicks efficiency, etc. Better techniques are being developed and are in lockstep with a process of open-ended inquiry and research. No one is holding the final answer.
But, hell, if I wanted to learn economics so as to apply it to the real world, I’d still rather read Paul Samuelson’s original 1948 version of Economics rather than anything a contemporary Austrian has written.
Better techniques are being developed and are in lockstep with a process of open-ended inquiry and research.
And more importantly, they’re being tested to determine whether they have any relevance to the real world.
Depends what you’re interested. There’s all these psychological phenomena rollin around. But if you don’t have really fundamental economic things, like prices, your model goes to crap. It wouldn’t matter how rational drivers were if you blindfolded them.
But, hell, if I wanted to learn economics so as to apply it to the real world, I’d still rather read Paul Samuelson’s original 1948 version of Economics rather than anything a contemporary Austrian has written.
Whats that thing about him endorsing communism (as it was crumbling)? Anyone have more info about that?
Any introductory links on evolutionary game theory?
rolls eyes These petty attacks are boring. Can’t you people come up with something better?
Can you explain why?
[EDIT. I don’t want to go there, my question to Neoclassical was off topic anyway.]
I. Ryan, I prefer Samuelson’s dispassionate style, his penchant for operationalism, and his willingness to seek synthesis rather than division.
I don’t buy the paradox of thrift or some of his stronger Keynesian sentiments, but I still find him less myopic than Rothbard. You can’t read Rothbard and get a sense of what economists have accomplished in the 20th-century, for instance. You can become a denialist that outright dismisses mainstream economics, but I don’t find that position tenable.
If nothing else, I’d want Austrian economists to more strongly hold hands with mathematical economics (etc.) for more positive feedback in both directions.
Would you suggest getting the 1948 first edition over the newer editions? Or was using the 1948 first edition in your example just supposed to emphasize your point?
Just to prove a point. He softened and omitted some of his more outrageously leftist points over the years, so I would consider newer editions to be preferable.
And, more honestly, I wouldn’t actually recommend the textbook at all, at least not as an introduction to more mainstream economics (for that, I’d recommend Hubbard and O’Brien’s Economics, David Friedman’s Price Theory, and Mankiw’s textbooks).
Varian all the way…
Other than the fact that Game Theory has nothing to do with real world economics…