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The problem with this sort of analysis is that its trivial (assuming you have time) to turn any common sense argument into a mathematical model. In game theory
by swatow 12y ago
The problem with this sort of analysis is that its trivial (assuming you have time) to turn any common sense argument into a mathematical model. In game theory, it's unlikely that the math is ever going to say "I can't let you do that" [1].
What actually gets published tends to be filtered by its political content. In particular, results with a liberal bias tend to be promoted.
[1] In classical economics, the reverse holds. It's very hard to show that any mechanism is possible under the assumptions of classical economics. Hence the huge number of negative results: (a) Coase theorem, (b) the Modigliani-Miller Theorem (irrelevance of capital structure) and (c) Ricardian equivalence. All these results basically say that if you try to do X (where X is (a) change people's actions that have externalities by assigning property rights, (b) change the value of a firm by changing its capital structure, and (c) change people's actions by government spending), the free market will completely undo your actions and leave the situation unchanged.
- pja 12y agoDon’t most of those theorems require rational agents ("homo economicus") with perfect knowledge?
- swatow 12y agoYes, and so we should treat the result with caution. But the results I were critiquing are worse, because they assume homo economicus plus some very specific deviations, or some very specific (non-free market) environment. The paper (and most game theory based papers) also assumes that people are perfectly rational and have perfect knowledge. The only difference is that instead of actions being restricted to the free market, and payoffs being consumption, game theory allows an arbitrary environment (chosen by the paper author) to provide the actions and payoffs.
- pja 12y agoSomewhere I have bookmarked a list of all the assumptions that go into the "classic" theorems of economics, written by a practising academic in the field. I’ll try and dig it out.
- swatow 12y agoYou seem to have missed my point. Either way, you are making a lot of assumptions. It's like "assume zero friction" vs "assume friction follows exactly this formula". In either case, your result is wrong if friction isn't exactly as you specify.
- pja 12y agoYou seem to be assuming that I’m trying to put you down instead of contributing (hopefuly) interesting things to a mutually beneficial discussion. Online discourse in a nutshell sadly.