And yet no one can seem to point to a single example of its use. (Thanks Digg.com, where many bloggers said Game Theory is descriptive, not prescriptive.)
Source link: http://blog.mises.org/5107/game-theory-oh-sure-many-people-use-it-all-the-time/
Game Theory? Oh sure, many people use it all the time
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Not true, game theory is profoundly useful in computing science. Deep Bleu skewled Gary Kasparov… you can bet Game Theory was involved. In Economics… well no, not so much. btw, the architecture in the computers we use now a days is called the “Von Neumann architecture” (after that dude that invented game theory and much else).
That’s actually a good was of putting it… Game Theory is common sense codified. Formalized so the logic can be put into a machine, which is the only place game theory is still kicking.
Actually, games theory would be used a lot more, even in economics, if economists hadn’t developed the habit of using other techniques. These are often more awkward and artificial, but for them using the traditional methods represents both sunk costs and barriers to entry for their trade.
At my publications page (unfortunately offline for the moment until my ISP gets its act together, but still cached by google) I have a fairly full description of one approach to helping unemployment. I came at this via games theory, though I didn’t detail the underlying mathematics.
However when I researched the area I found that a credentialled economist, Professor Kim Swales of the University of Strathclyde, had also looked into it at about the same time using a different and far more traditional approach. You can read up about it here.
My mistake. This was already blogged last year (!!!) but I’ll leave it up.
You may be on to something here. I saw an article somewhere about a poker champ using game theory, but he admitted it only works when he gets past the ranks of amateurs and starts playing against pros. This indicates a potential weakness of the theories. In businesses where I’ve worked, management doesn’t seem to concerned about the competition and that’s where game theory would help. They’re not concerned about competitors, partly, because they think that their product/service, or management skills are superior to those of the competition. Or, in many markets, there is a market leader that is clearly superior to all others and the rest spend their time trying to immitate or catch up to the leader. Game theory doesn’t hold much interest in those situations.
The problem with game theory is that it needs to set up simplified problems that don’t reflect the complexities of real life. The perfect example of this is in the movie “A Beautiful Mind” when the actor playing John von Neumann tells his fellow students that none of them should go after the prettiest girl in a group. He then uses Game Theory to justify this wacky theory.
I hold to a belief in basic supply and demand so I don’t mind if Game Theorists don’t go after the prettiest girl in a bunch, it cuts down competition. But my suspicion is that in meeting women Game Theory isn’t used by most economists either.
Deep,
Well put. caeteris paribus, ad infinitum,=stasis (long the stock & trade of, the dominant, Polaroid School of Economics) leads to the observation that most “economists” would be better utilized as Morticians. That the policy recommendations served up by use of such hackneyed tools has caused much mayhem, one can only wonder whether the AEA’s pension fund is long HB.
Two problems with that, Deep Theory: (1) Beautiful Mind is about John Nash, not John von Neumann. (2) the “don’t go after the pretty girl” thing used as an example of “Nash equilibrium”…isn’t.
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