Ariel Rubinstein brings his game theory debunking manifesto to The Browser.
In general, I would say there were too many claims made by game theoreticians about its relevance. Every book of game theory starts with “Game theory is very relevant to everything that you can imagine, and probably many things that you can’t imagine.” In my opinion that’s just a marketing device.
Let’s show its usefulness by using game theory to analyze Ariel Rubinstein. We model him with the following game. Ariel is the first mover. He privately observes whether game theory is useful. Then he has the first decision to make. He can either announce publicly that game theory is not useful or stay silent. If he stays silent the game is over. If he announces then everybody else moves next. We can either try to prove him wrong by citing examples where game theory is useful or we can stay silent. Then the game ends.
Let’s solve the game by backward induction. If Ariel has announced that game theory is not useful, each of us has a strong incentive to find examples to prove him wrong so we do (assuming game theory is in fact useful which we will find out by looking for examples.) Knowing this, and having privately observed that game theory is useful and being the humble yet social-welfare maximizing (not to mention supremely strategic) person Ariel is, Ariel announces that game theory is not useful so as to give the rest of us the incentive and the glory of proving him wrong.
And so it is done.
Cheap Talk 
22 comments
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June 6, 2012 at 9:15 am
Joshua Gans
It gets even better if someone awards him a Nobel prize for useful contributions to game theory.
June 6, 2012 at 9:21 am
jbchilton
Which would sell more of his books — to say it isn’t or to be silent? The answer is clear.
June 6, 2012 at 9:36 am
Bruno Salcedo
Except that all his books are posted on his website for free
June 6, 2012 at 2:32 pm
Anonymous
Bruno – very cool, although I wonder if that’s common knowledge. His current release isn’t available for free yet. And I see (ironically?) that A Course in Game Theory still sells nicely according to Amazon.
June 7, 2012 at 1:47 am
Ariel
Just to clarify (as a response to anonymous): the new book, Economic Fable, is also available for FREE reading through google books.
June 6, 2012 at 11:15 am
Enrique
Of course, we could also apply a meta-game-theoretic analysis to jeff’s game-theoretic response to Ariel’s statement to analyze the logic of jeff’s blog post — i.e. given that ariel has apparently played a hawk or non-cooperative strategy (by questioning the usefulness of game theory), then jeff must also defect by playing hawk, since playing dove (i.e. staying silent or agreeing with ariel) gives jeff a lower payoff (0) than fighting back (v minus c, all divided by 2, in the standard hawk-dove model)
June 6, 2012 at 12:51 pm
Brittany
But Jeff’s analysis must be common knowledge. Ergo, there may be little glory/incentive in ‘proving’ Ariel wrong if we can all deduce that he is intentionally speaking falsehoods.
We need to solve the other branch of the tree where Ariel stays silent. Otherwise we can’t condition our beliefs on his actions. Our decision to work in game theory depends on how Ariel’s choice influences our beliefs about game theory, which is missing from the model.
June 6, 2012 at 1:01 pm
jeff
thank you brittany for your further proof.
June 6, 2012 at 3:18 pm
k
i thought ariel rubinstein said that game theory is indirectly useful, but he has personally never observed an answer from a game theorist that is better than the guy on the street.
June 7, 2012 at 11:33 am
Assorted links — Marginal Revolution
[…] 2. Proof that game theory is useful. […]
June 7, 2012 at 2:21 pm
David
Just to clarify (as a response to Ariel): putting a book on cloud for FREE has also a semi-game theoretic description. You have two strategies, put it for free or put it for 20$. If you put it there for 20$, you’ll sell X books. If you put it for FREE, KX people will read it. (K>>1) More people will know you. More people will buy other books of you, or you’ll be invited to different places for talks/seminars. Your utility, definitely, is not only a function of your money, but also a function of how many people know you in the world.
June 7, 2012 at 4:07 pm
Kiran
But all these discussions show that game theory is useful is proving that game theory is useful in proving that game theory has at least one ‘use’. But is this what Ariel means by being ‘useful?’
June 7, 2012 at 4:46 pm
lordmarbury
I fear you rather prove Ariel’s point here. Surely the best refutation of it is here: http://www.youtube.com/watch?v=S0qjK3TWZE8&feature=player_embedded
June 7, 2012 at 9:46 pm
jeff
now see here:
June 7, 2012 at 6:36 pm
Lemmy Caution
Game theory is interesting but it is a lot less useful than people make it out to be. If you are setting up a spectrum auction or something maybe you need it. It isn’t like you need to learn game theory to sell cars or anything though. Even people who use strategy do just fine with rules of thumb or even just feedback for repeated situations.
June 7, 2012 at 10:11 pm
Andrew
Your proof takes as a premise that game theory is useful (your parenthetical comment), so it seems to me that you’ve only proved Ariel wrong if you first assume that Ariel is wrong.
I will assume you wrote this supposed proof just to induce us to point out its flawed logic.
June 8, 2012 at 10:46 am
Demosthenes
Was just going to point this out.
The proof begs the question.
June 8, 2012 at 1:20 am
Why study Game theory when it has limited practical applications in real life? « Mostly Economics
[…] stuff from Prof. Ariel. Here is a counterpost on why GT is […]
June 8, 2012 at 8:08 am
Tony
Useful/Not useful is a dichotomous state which is completely invented for the model. It’s a lot like putting words in his (Rubenstein’s) mouth. His literal quarrel is with the quantity of claims made about the usefulness of game theory (and less literally, that game theory’s usefulness is overstated, but does exist).
June 11, 2012 at 4:31 am
Dalkiran
I think Jeff’s post (model) is elegant. But I guess it would be silly for someone in the field to buy the argument that Ariel’s intention is to give us incentives to ”work harder” to prove him wrong.
His point to my understanding is that we should not take game theory so seriously, neither should we take policy recommendations backed up with our abstract models.
Being just out of PhD, below is what I currently think about this matter:
I think our intuition is far more superior than our analytical mind. We know from Godel that there is no complete and consistent logical system under fairly reasonable axioms. Therefore any abstract model will fail at some point.
The question is then: Do we need simple models to backup our intuition? As being someone just out of PhD, my feeling is that the answer is yes. Yet, I am not sure, once we created a model, whether we become careerists producing for the sake of our reputation or we are scientists trying to understand the reality.
I am sure Rubinstein wants us to be the latter. But to be able to do science one has to believe in two axioms:
1. There is a ”natural” reality
2. Humans have the ability to gain knowledge about that ”natural” reality.
I believe the roots of Ariel’s critique can be traced back to Axiom #2 which might essentially seem a bit shaky in the case of social sciences. Therefore, I believe we cannot be what he wants us to be if we cared about his very own critique. His very own critique would lead us to be careerists — which he wouldn’t like.
I now remember a quote from Kuhn: ”Scientists must behave like philosophers only when there are competing theories.” So maybe Kuhn is right –ignorance is bliss, at least at the philosophical level– we should hence ignore Ariel’s critique and go back to our models hoping that one of them eventually will achieve something Ariel is fond of.
July 4, 2012 at 5:03 pm
diomavro
Good post!
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