Can social phenomena be understood by analyzing their parts? Contemporary economic theory often assumes that they can. The methodology of constructing models which trace the behavior of perfectly rational agents in idealized environments rests on the premise that such models, while restricted, help us isolate tendencies, that is, the stable separate effects of economic causes that can be used to explain and predict economic phenomena. In this paper, I question both the claim that models in economics supply claims about tendencies (...) and also the view that economics, when successful, necessarily follows this method. When economics licenses successful policy interventions, as it did in the case of the Federal Communications Commission spectrum auctions, its method is not to study tendencies but rather to study the phenomenon as a whole. Key Words: economic models • tendencies • economic experiments • policy making • John Stuart Mill. (shrink)

Analytical techniques for determining the net worth of the consequences of alternative choices are increasingly used to motivate decisions about public projects and policies, especially where risks are prevalent. What information do these techniques provide, and what are the grounds for using them in decision making? It is argued that the apparent similarities of cost-risk-benefit analyses to decision theory are in some ways misleading, and that the true basis of such analyses in welfare economics suggests some inherent limitations to their (...) use. The limitations described arise from the practice of aggregating individual preferences as determined by economic valuations; they restrict (but do not invalidate) the application of such analyses. (shrink)

We provide welfarist evaluations of decision rules for federations of states and consider models, under which the interests of people from different states are stochastically dependent. We concentrate on two welfarist standards; they require that the expected utility for the federation be maximized or that the expected utilities for people from different states be equal. We discuss an analytic result that characterizes the decision rule with maximum expected utility, set up a class of models that display interstate dependencies and run (...) simulations for different dependency scenarios in the European Union. We find that, under positive correlations, the welfare distribution tends to be less sensitive to the choice of the decision rule, whereas it can be important under negative correlations. The results that Beisbart and Bovens (SCW 29, p. 581, 2007) have found for two types of models without interstate dependencies are relatively stable. There are exceptions, though, under which the way the welfare distribution is shaped by a decision rule is significantly affected by dependencies. (shrink)

’Tis vain to talk of adding quantities which after the addition will continue to be as distinct as they were before; one man’s happiness will never be another man’s happiness: a gain to one man is no gain to another: you might as well pretend to add 20 apples to 20 pears.

This short paper begins with a summary of the views of a sympathetic game theorist on the current state of play in what is still called the New Institutional Economics. It continues with a much abbreviated summary of my own attempts to treat justice as a kind of institution in the hope that this will serve as a case study in how game theory can serve as a useful intellectual framework for the study of human institutions.

: Being scientific research a process of social interaction, this process can be studied from a game-theoretic perspective. Some conceptual and formal instruments that can help to understand scientific research as a game are introduced, and it is argued that game theoretic epistemology provides a middle ground for 'rationalist' and 'constructivist' theories of scientific knowledge. In the first part ('The game theoretic logic of scientific discovery'), a description of the essential elements of game of science is made, using an inferentialist (...) conception of rationality. In the second part ('Sociology of science and its rational reconstructions'), some ideas for the reconstruction of case studies are introduced, and applied to one example: Latour's analysis of Joliot's attempt to build an atomic bomb. Lastly, in the third part ('Fact making games'), a formal analysis of the constitution of scientific consensus is offered. (shrink)

Bicchieri (The grammar of society: The nature and dynamics of norms, 2006, xi) presents a formal analysis of norms that answers the questions of “when, how, and to what degree” norms affect human behavior in the play of games. The purpose of this paper is to apply a variation of the Bicchieri norms analysis to generate a model of norms-based play of the traditional deterrence game (Zagare and Kilgour, Int Stud Q 37:1–27, 1993; Morrow, Game theory for political scientists, 1994), (...) the paradigmatic model of conflict initiation in International Relations. The deterrence game is modeled here as a sequential decision problem. As such, our analysis is an adaptation of Bicchieri’s game-theoretic formalization of norms to what we will call the norms account of the game. We find that the standard account of the traditional deterrence game is a special case of the norms account of the game. We also show that the adaptation of Bicchieri’s analysis of social norms yields new and interesting claims regarding when, how, and to what degree norms operate as a constraint on risk-related behavior in the traditional deterrence game. Moreover, we discuss how the results of the model provide testable propositions of relevance to the role of norms in international interactions. (shrink)

This is the introductory essay to the Italian translation of Matt Ridley's "The origins of virtue", surveying the game-theoretic and evolutionary approaches to the emergence and evolution of cooperation and altruism.

This book demonstrates that the state-contingent approach provides the best way to think about all problems in the economics of uncertainty, including problems ...

The development of access rights as, perhaps, a replacement for copyright in digital rights management (DRM) systems, draws our attention to the importance of ‚the balance problem’ between information industries and the individual user. The nature of just what this ‚balance’ is, is often mentioned in copyright writings and judgments, but is rarely discussed. In this paper I focus upon elucidating the idea of balance in intellectual property and propose that the balance concept is not only the most feasible way (...) to examine whether past solutions to copyright problems are fair, but it also provides the ability to predict what will be the better solution for all affected parties. Based upon an envy-free contribution towards predicting the efficient balance, game theory is applied in a novel manner to the DRM problem to infer where and what might be the optimal balance in the debate over the nature of access right. (shrink)

This paper provides a model of the transition from hegemonic trade to contemporary (or fair) trade. Hegemonic trade is an instance of the two player game called Bully (Poundstone 1992) and Called Bluff (Snyder and Diesing 1977); contemporary trade is an instance of Prisoner's Dilemma (Krugman and Obstfeld 1991). In this paper, I show that a nation under the thumb of a hegemon, called the conciliatory nation, can induce fair trade. Further, I show that to induce fair trade, the conciliatory (...) nation must not be timied. (shrink)

This paper critically reviews Ken Binmore’s non- utilitarian and game theoretic solution to the Arrow problem. Binmore’s solution belongs to the same family as Rawls’ maximin criterion and requires the use of Nash bargaining theory, empathetic preferences, and results in evolutionary game theory. Harsanyi has earlier presented a solution that relies on utilitarianism, which requires some exogenous valuation criterion and is therefore incompatible with liberalism. Binmore’s rigorous demonstration of the maximin principle for the first time presents a real alternative to (...) a utilitarian solution. (shrink)

The aim of this paper is to critically review the game-theoretic discussion of Hobbes and to develop a game-theoretic interpretation that gives due attention both to Hobbes's distinction between “moderates” and “dominators” and to what actually initiates conflict in the state of nature, namely, the competition for vital goods. As can be shown, Hobbes's state of nature contains differently structured situations of choice, the game-theoretic representation of which requires the prisoner's dilemma and the assurance game and the so-called assurance dilemma. (...) However, the “state of war” ultimately emerges from situations that cannot be described by any of these games because they represent zero-sum games in which the outcome of mutual cooperation does not exist. (shrink)

Economists interpret global environmental quality to be a pure public good. Each country should contribute to its provision. However, this is hard to achieve because each government is tempted to take a free ride on the other governments' efforts. Not only has this dilemma been analysed with game theoretical methods but game theory has also been used to think about how to make amends. This paper reviews the game theoretical discussion on how international policy frameworks may be designed to improve (...) the chances for international cooperation. It is also shown that the evaluation of alternative environmental policy instruments deviates from the standard environmental economics model if applied to the international arena. For the benefit of an interdisciplinary readership, the evolution of the debate on global environmental policy is related to the recent history of economic thought. This history is taken to be materialised in the writings of economics' Nobel Prize laureates. (shrink)

The social phenomena discussed in this series of essays all center around the problem of individuals in groups faced with the choice of doing what is best for themselves or what is best for the group. Instances of the phenomena are called by many different names: "Volunteer's Dilemma", "Prisoner's Dilemma", "Collective Choice", "Rational Choice", "Social Choice", and "Voter's Paradox" to list just a few. Unfortunately, the academic programs that cover these various manifestations of the "individual vs. group" dilemma do not (...) fall under one discipline. You will not find the "Social Dilemma" department at any.. (shrink)

Economic logic impinges on contemporary political theory through both economic reductionism and economic methodology applied to political decision-making (through game theory). The authors argue that the sort of models used are based on mechanistic and linear methodologies that have now been found wanting in physics. They further argue that complexity based self-organization methods are better suited to model the complexities of economy and polity and their interactions with the overall social system.

Abstract Twenty years ago, Tibor Scitovsky questioned the assumption, embedded in neoclassical economics, that human happiness will be augmented if the level of consumption either rises or becomes more uniform over time. Evidence from the 1990?1993 World Values Survey suggests that his doubts were well?founded: although economic gains apparently make a major contribution to subjective well?being as one moves from societies at the subsistence level to those with moderate levels of economic development, further economic growth seems to have little or (...) no impact on subjective well?being. This transition seems to reflect a basic cultural change that results in the diminishing marginal utility of economic growth. (shrink)

Both terrorism and game theory are contested concepts within the social sciences, but in this paper, I will show that a rational approach (game theory) towards the emotion-laden idea and practice of terrorism does aid understanding of the “terrorist theatre”. First, an outline will be provided on the type of actors (game players) that are, or may be, involved to a more or lesser extend in (supporting) terrorism. Then several game models will be assessed on their applicability. This includes averting (...) the joint bargaining paradox when asymmetric actors cooperate to achieve a joint goal, governments who may fare better from their point of view when dividing up refugees into geographically separate areas to decrease the possibility of cooperation between aggrieved groups and recognizing two-speed negotiations, which can have a (detrimental) effect on (deadline) negotiations. Further, an adaptation of the audience cost model explained the “war of nerves” of the terrorist theatre involving the generation of fear amongst its targets and the updating of information on moderate actors by action of extremists. Several mutations of the Prisoner’s Dilemma were discussed as options to prevent mutual harm. (shrink)

This paper is part of a larger project defending of the foundations of microeconomics against recent criticisms by philosophers. Here, we undermine one source of these criticisms, arising from philosophers' disappointment with the performance of microeconomic tools, in particular game theory, when these are applied to normative decision theory. Hollis and Sugden have recently articulated such disappointment in a sophisticated way, and have argued on the basis of it that the economic conception of rationality is inadequate. We argue, however, that (...) their claim rests upon a misunderstanding of the concept of a game as it is used in microeconomics. (shrink)

On the orthodox view in economics, interpersonal comparisons of utilityare not empirically meaningful, and ``hence'' impossible. To reassess this view, this paper draws onthe parallels between the problem of interpersonal comparisons of utility and the problem of translation of linguisticmeaning, as explored by Quine. I discuss several cases of what the empirical evidence for interpersonal comparisonsof utility might be and show that, even on the strongest of these, interpersonal comparisons are empiricallyunderdetermined and, if we also deny any appropriate truth of (...) the matter, indeterminate. However, the underdeterminationcan be broken non-arbitrarily (though not purely empirically) if (i) we assign normative significance to certainstates of affairs or (ii) we posit a fixed connection between certain empirically observable proxies and utility.I conclude that, even if interpersonal comparisons are not empirically meaningful, they are not in principle impossible. (shrink)

In recent attempts at deriving morality from rationality expected utility theory has played a major role. In the most prominent such attempt, Gauthier'sMorals by Agreement, a mode of maximizing utility calledconstrained maximization is defended. I want to show that constrained maximization or any similar proposal cannot be coherently supported by expected utility theory. First, I point to an important implication of that theory. Second, I discuss the question of what the place of constrained maximization in utility theory might be. Third, (...) I argue that no matter how we answer this question, expected utility theory cannot provide the reason why a moral disposition like constrained maximization is to be preferred to its rivals. (shrink)

In this article, I argue that if one closely follows Hobbes' line of reasoning in Leviathan, in particular his distinction between the second and the third law of nature, and the logic of his contractarian theory, then Hobbes' state of nature is best translated into the language of game theory by an assurance game, and not by a one-shot or iterated prisoner's dilemma game, nor by an assurance dilemma game. Further, I support Hobbes' conclusion that the sovereign must always punish (...) the Foole, and even exclude her from the cooperative framework or take her life, if she defects once society is established, which is best expressed in the language of game theory by a grim strategy. That is, compared to existing game-theoretic interpretations of Hobbes, I argue that the sovereign plays a grim strategy with the citizens once society is established, and not the individuals with one another in the state of nature. (shrink)

The combination of individual judgments on logically interconnected propositions into a collective decision on the same propositions is called judgment aggregation. Literature in social choice and political theory has claimed that judgment aggregation raises serious concerns. For example, consider a set of premises and a conclusion in which the latter is logically equivalent to the former. When majority voting is applied to some propositions (the premises) it may give a different outcome than majority voting applied to another set of propositions (...) (the conclusion). This problem is known as the doctrinal paradox. The doctrinal paradox is a serious problem since it is not clear whether a collective outcome exists in these cases, and if it does, what it is like. Moreover, the two suggested escape-routes from the paradox - the so-called premise-based procedure and the conclusion-based procedure - are not, as I will show, satisfactory methods for group decision-making. In this paper I introduce a new aggregation procedure inspired by an operator defined in artificial intelligence in order to merge knowledge bases. The result is that we do not need to worry about paradoxical outcomes, since these arise only when inconsistent collective judgments are not ruled out from the set of possible solutions. (shrink)

This paper presents a personal view of the interaction between the analysis of choice under uncertainty and the analysis of production under uncertainty. Interest in the foundations of the theory of choice under uncertainty was stimulated by applications of expected utility theory such as the Sandmo model of production under uncertainty. This interest led to the development of generalized models including rank-dependent expected utility theory. In turn, the development of generalized expected utility models raised the question of whether such models (...) could be used in the analysis of applied problems such as those involving production under uncertainty. Finally, the revival of the state-contingent approach led to the recognition of a fundamental duality between choice problems and production problems. (shrink)

If it was a matter of hunting a deer, everyone well realized that he must remain faithful to his post; but if a hare happened to pass within reach of one of them, we cannot doubt that he would have gone off in pursuit of it without scruple..." Rousseau's story of the hunt leaves many questions open. What are the values of a hare and of an individual's share of the deer given a successful hunt? What is the probability that (...) the hunt will be successful if all participants remain faithful to the hunt? Might two deer hunters decide to chase the hare? (shrink)

I resolve a previously unnoticed anomaly in the analysis of collective action problems. Some political theorists apply game theory to analyze the paradox of anarchy: War is apparently inevitable in anarchy even though all warring parties prefer peace over war. Others apply tipping threshold analysis to resolve the paradox of revolution: Joining a revolution is apparently always irrational even when an overwhelming majority of the population wish to replace their regime. The usual game theoretic analysis of anarchy yields the conclusion (...) that the suboptimal equilibrium of war is inevitable. The usual tipping threshold analysis of revolution yields the conclusion that the optimal equilibrium of successful revolution is possible. Yet structurally the collective action problems of anarchy and potential revolution are much the same. This suggests that tipping threshold analysis and game theory are incompatible methodologies, despite their widespread use in the social sciences. I argue that there is no real tension between game theory and tipping threshold analysis, even though these methodologies have developed largely independently of each other. I propose a Variable Belief Threshold model of collective action that combines elements of game theory and tipping threshold analysis. I show by example that one can use this kind of hybrid model to give compatible explanations of conflict in anarchy and successful revolution. Introduction Two Classic Problems, and Two Popular Analyses 2.1 The paradox of anarchy 2.2 The paradox of revolution Restating the Puzzle Evaluating the Prisoners’ Dilemma and S -Curve Models The Variable Belief Threshold Model Example 5.1. A population of moderates with independent deviations Example 5.2 A heterogeneous population with independent deviations Example 5.3 A heterogeneous population with coordinated deviations Conclusion Appendix: Computer Simulations CiteULike Connotea Del.icio.us What's this? (shrink)

Peter Vanderschraaf. Game Theory, Evolution and Justice.

This paper summarizes and rebuts the three standard objections made by social choice theorists against interpersonal utility. The first objection argues that interpersonal utility is measningless. I show that this objection either focuses on irrelevant kinds of meaning or else uses implausible criteria of meaningfulness. The second objection argues that interpersonal utility has no role to play in social choice theory. I show that on the contrary interpersonal utility is useful in formulating goals for social choice. The third objection argues (...) that interpersonal utility in social choice theory can be replaced by clearer notions. I show that the replacements proposed are unsatisfactory in either interpersonal utility's descriptive or explanatory role. My conclusion is that interpersonal utility has a legitimate place in social choice theory. (shrink)