On the real-world irrelevance of game theory

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Lars Pålsson Syll
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On the real-world irrelevance of game theory

It has been argued that some ascription of rationality plays a crucial role in particular in game theoretic modeling from a participant’s point of view. However, ascribing some kind of ideal reasoning process symmetrically to all players in the game, it becomes very unclear whether we as analysts can truly adopt a participant’s attitude to such an idealized interaction. After all, we are as a matter of fact only boundedly rational and not perfectly rational beings ourselves …

According to the way we normally use the common knowledge assumption along with that of symmetrically rational, and, for that matter, perfectly rational individuals, each and every individual is assumed to reason the same way about the game. We in effect have reduced the problem of reasoning in an interactive situation to the reasoning of a representative ideal individual who knows the game in full and shares this knowledge by virtue of the common knowledge assumption with each and every other participant. The game theorist and the participants in the game are in the same situation. Everybody comes exactly to the same conclusions as everybody else when thinking about the game before the specific play of the game starts.

In sum, as far as the reasoning itself is concerned we are not talking about some interactive reasoning practice. It is rather an ideal type of reasoning to which all ideal type reasoners are assumed to “converge.” It is the reasoning of a representative ideally rational individual.
 

Hartmut Kliemt

Game theory gives us analytical truths — truths by definition. That is great — from a mathematical and formal logical point of view. In science, however, it is rather uninteresting and totally uninformative! Even if pure game theory gives us ‘logical’ truths, that is not what we are looking for as scientists. We are interested in finding truths that give us new information and knowledge of the world in which we live.

Scientific theories are theories that ‘refer’ to the real-world, where axioms and definitions do not take us very far. To be of interest for an economist or social scientist that wants to understand, explain, or predict real-world phenomena, the pure theory has to be ‘interpreted’ — it has to be ‘applied’ theory. A game theory that does not go beyond proving theorems and conditional ‘if-then’ statements — and do not make assertions and put forward hypotheses about real-world individuals and institutions — is of little consequence for anyone wanting to use theories to better understand, explain or predict real-world phenomena.

Game theory has no empirical content whatsoever. And it certainly has no relevance whatsoever to a scientific endeavour of expanding real-world knowledge.