Does Austrian Economics have any perspectives on game theory? I am curious because I have heard that it is related to economics.
From http://mises.org/Community/forums/p/18622/351827.aspx#351827 :
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":
We shall therefore assume that the aim of all participants in the economic system, consumers as well as entrepreneurs, is money, or equivalently, a single monetary commodity
(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.
"I'm not a fan of Murray Rothbard." -- David D. Friedman
Neoclassical: Game theory > Austrian economics.
Can you explain why you think that?
If I wrote it more than a few weeks ago, I probably hate it by now.
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.
Ambition is a dream with a V8 engine - Elvis Presley
Game theory > Austrian economics. Evolutionary game theory > classical game theory.
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.
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Whats that thing about him endorsing communism (as it was crumbling)? Anyone have more info about that?
Any introductory links on evolutionary game theory?
Neoclassical:Taking issue with utility-maximization while endorsing a 100-year old faith in praxeology seems outrageous to me.
**rolls eyes** These petty attacks are boring. Can't you people come up with something better?
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process. Rabbi Lapin: "Let's make bricks!" Stephan Kinsella: "Say you and I both want to make a German chocolate cake."
Neoclassical: 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.
Can you explain why?
[EDIT. I don't want to go there, my question to Neoclassical was off topic anyway.]
"The market is a process." - Ludwig von Mises, as related by Israel Kirzner. "Capital formation is a beautiful thing" - Chloe732.
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.
Neoclassical: 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...
“Socialism is a fraud, a comedy, a phantom, a blackmail.” - Benito Mussolini"Toute nation a le gouvernemente qu'il mérite." - Joseph de Maistre
EconomistInTraining:Varian all the way...
I just ordered Intermediate Microeconomics. Better be good!
Vichy Army, so all those economics textbooks and all those academics are finding no relationship between game theroy and the "real world"?
Um, 99% of economics you see in a University beyond intro micro is bogus and ridiculous nonsense.
It is good, I'm not sure you'll find anything new in it, but in terms of explaining the intuition of microeconomics it's unbeatable, forget Murphy, Varian is an absolute genius. It wasn't the micro textbook used for my class, but I ended up using it for the entire course, I bought a bunch of other intermediate micro books on the cheap to see if they could help at all, but there wasn't anything in those that wasn't explained better and more succinctly by Varian. All of my teachers agreed, I'm interested in getting his advanced textbook and working through that before I apply for a masters.
In terms of macro, I've yet to find a decent textbook. Mankiw is decent enough at an intro level, but it's far too repetitive for my liking, the same goes for Blanchard, I've looked at a few others that my professors recommended and the only one that stood out as being halfway decent was Carlin & Soskice.
It is the best mainstream intermediate text on the market. The only criticism I have is his failure to add a chapter on public choice, which should come right after the chapter on welfare economics (although to be fair, he does go over the Arrow Impossibility Theorem and a few other problems with welfare economics).
Oh come on! At most, 4/5 of it is nonsense.
"I cannot prove, but am prepared to affirm, that if you take care of clarity in reasoning, most good causes will take care of themselves, while some bad ones are taken care of as a matter of course." -Anthony de Jasay
how much of it have you seen?
Keynesian and variants, NeoClassical standard, Chicago, Institutionalist, Supply-Sider and various Marxist kinds. They're all predicated on absurd defintions; even when correct it's really a matter of not following their alleged foundations.