One assumption, often unstated, in the economics we teach at the introductory and intermediate levels is the absence of force. Another assumption that we typically take a while to unpack is the rule of law and property rights. And still a third assumption is the cultural context of what is fair game to be traded in a society. I want to talk a little bit about where they show up in the context of two key ideas in the undergraduate-level canon, general equilibrium theory and externality theory.
As I continue my summer-long vision quest to build the platonic ideal of an Econ 101 syllabus (kidding… maybe?), I’m thinking about modeling, representation, and narrative.
The question at hand for the course is how to balance “received wisdom” versus “how we do things”. I’ve always found one of the hardest things to get across in teaching economics the idea of modeling.
I think game theory is awesome. First of all, it is the most ingeniously named field in the history of thought. Who doesn’t want to study something called “game theory”? Marketing!
Second of all, it forces a student—it certainly forced me—to confront kinds of logic, problem-solving, and epistemological questions that are quite different to the norm. Certainly quite different to the norm elsewhere in economics, at least. It is thinking about thinking, which for a certain type of person is a fun rabbit hole.
Game theory is about how we can try to understand situations in which the outcome of my choice depends also on what you choose. These are situations with strategic interaction. I can’t just pick the thing I like best, as in the standard rational choice model. I have to think about what you want, what you might do, how you might respond, what you think about me, what you think I might do—and you have to think all of those things right back at me. It’s gnarly!
So I saw this at the Browser today:
How often do you see a reference to game theory that isn’t about the prisoner’s dilemma? Very seldom, if ever, I think, and in my opinion game theory is worse for it.
I include in that references to game theory in academic courses too, by the way. I’ve taught game theory for undergraduates many times (in the context of applications to economics), and it’s remarkable how many students come to those classes under the impression that game theory is the prisoner’s dilemma. I don’t think they are wholly to blame for the mistake.
I’m not here to tattle on anyone, but I’ve had smart students show up at game theory class and tell me that game theory is about how you should rat out your friends. Uh oh!
Now, I come not to praise the prisoner’s dilemma, but nor do I want to bury it. First, it swiftly and usefully undermines the notion that decentralized decision-making necessarily leads to mutually beneficial outcomes. Second, as with any simple game, it can be extended and varied in endless ways to tell many rich and useful stories—most obviously by thinking about a repeated prisoner’s dilemma with inducements, rewards, and punishments. Third, it’s a useful parable for a variety of real-world situations.
There are more qualities of the game, of course. For a dive into the depths of what it can teach us, I recommend its entry in the Stanford Encyclopedia of Philosophy.
But here’s the problem: the vanilla prisoner’s dilemma is the least interesting game in game theory. I’m not going to rehash the setup again here (trust me, it’s been done enough). The reason it’s the least interesting game is that the very point of the prisoner’s dilemma is that its setup gives each of the two players in the game a unilateral incentive to make a given choice.
The vanilla prisoner’s dilemma boils down to the smallest variation on the rational choice model. I don’t particularly need to think about what you might do, or what you might be thinking. No matter what you do, one of my options is always better. Yeah, it carries a non-trivial lesson, but to me it just seems so flat. I don’t really get much of a hint of the mind-bending joys of game theory from it. If this is game theory, then game theory isn’t much at all.
And so often, in my experience, students see the vanilla prisoner’s dilemma, see it called game theory, and then move on to something else. Nothing else is being imprinted on them about the example or the field. I think that’s a shame.
So in that spirit I call on those of us who would like to touch on game theory in non-game theory course, or those of us who write game theory into introductory economics texts, to consider showing, instead of or as well as the prisoner’s dilemma, some different interesting games. Here are a few of my suggestions:
I’m not saying we have to retire the prisoner’s dilemma’s number just yet. But I think we can do a little more when we give our students their first taste of the rich, fun field of game theory.
If you have any thoughts on my game suggestions, do let me know!
From Tim Barker’s review of Johanna Bockman’s Markets in the Name of Socialism:
The Left-Wing Origins of Neoliberalism, which is currently waiting in my to-read line:
Her real focus is the relationship between socialist politics and neoclassical economics. As her intellectual and political history deftly illustrates, there is no inherent affinity between neoclassical theory, market institutions, and capitalism. (Here she offers a corrective to Marxists like Harvey, whose key text on neoliberalism conflates it with neoclassical economics.) The pioneers of neoclassical economics recognized the relevance of socialism to their project and assumed that one scientific vocabulary could therefore apply to socialism and capitalism.
The conflation of an ideology with the pervasive methodology of economic theory is a disheartening one. It bleeds into the quandaries of teaching introductory economics, into the otherwise valuable methodological critiques and innovations within economics, the characterization of economists as evil.
I submit that (i) we have two words that are slippery to define and both start with “neo-“, and (ii) “economics” is sometimes taken to connote “business” and soulless bean-counting, and so we are stuck with a misconception that I very much wish we could shake.
This conflation is not acceptable to me and I don’t see any easy way to battle it. I do think it argues in favor of an unapologetically wonky Econ 101 that explicitly includes more fundamental methodology, whatever the cost. We must teach our methodology properly if we want it to be interpreted properly.
I’m preparing to teach Econ 101 this fall for the first time since 2008. Reviewing textbooks and figuring out what to teach, I find myself right back in that moment. My understanding of what economics is seems to me as far away as it ever did from how we teach it and what it’s perceived as. I feel as tarred and feathered by the field as I ever did.
At that time in 2008, the financial crisis was revving up and I was working out my concept of economics and what I could possibly make of it. I was writing a lot in an anonymous blog, to organize my thoughts, work out my differences of opinion with the field, procrastinate from more mundane work, and figure out what I thought an economist was. The problem was that I was allegedly in the process of becoming an economist, but I didn’t really see myself reflected in what that seemed to mean.
I guess I still don’t. Since I find myself revisiting similar thoughts now, I decided to unseal that part of my record and merge all of those old writings here. So it’s all now in the archives on this site, which you can get to through the widget on the right (the old site is still up at this link). I’m sure there are plenty of things that I wouldn’t write again in retrospect. But I want to be honest about how that process went for me, and how it still goes.
Jim Campbell 