Via Jeff, from Ariel Rubinstein’s afterword (pdf) for a reprinting of von-Neumann and Morgenstern’s book in which Ariel states his opinion about the usefulness of game theory for real-life strategic interactions (emphasis mine)
According to this opinion, Game theory does not have normative implications and its empirical significance is very limited. Game theory is viewed as a cousin of logic. Logic does not allow us to screen out true statements from false ones and does not help us distinguish right from wrong. Game theory does not tell us which action is preferable or predict what other people will do. If game theory is nevertheless useful or practical, it is only indirectly so. In any case, the burden of proof is on those who use game theory to make policy recommendations, not on those who doubt the practical value of game theory in the first place.
And, by the way, I sometimes wonder why people are so obsessed in looking for “usefulness” in economics generally and game theory in particular. Should academic research be judged by its usefulness ?
Readers of this blog can hopefully guess my view on this issue. I don’t view game theory as a mathematical or logical exercise (I am not sure that’s Ariel’s view either), but I have never found it useful in my own interactions with fellow human beings. As Rubinstein says, the burden of proof is on those who use game theory to make policy recommendations, and I have never seen such a proof: I have never came across any example in which a theorem or a definition or an insight from game theory turned out to be useful in policy recommendation or in predicting human behavior in strategic situations. But that doesn’t say much since I have little patience to look into such proclaimed proofs and I usually just shrug them off without studying them carefully. The reason is that even if there were situations in which game theory would turn out to be useful in this sense, it wouldn’t make game theory more exciting for me.
Which brings me to Rubistein’s question about judgding academic research. To be sure, some academic enterprises have practical usefulness, sometimes even in a way that was not originally foreseen. The applicability of number theory to encryption protocols is a wonderful example. But that’s not the reason why prime numbers are so fascinating, nor is building bridges the reason we are curious about the laws of the universe. Similarly, while I can see several reasons to be driven to study game theory, I doubt if any of us has done so to improve their performance in strategic situations. So why do so many game theorist feel the need to justify their interest in game theory by appealing to real life applicability ?
Btw, my feeling is that most of our seniors don’t agree with Ariel here. You can see this in the round table discussions in conferences. While not everyone actually claim that game theory is useful for policy making right now, the premise is always that this is our ultimate goal. But I believe Ariel’s position is relatively popular among juniors. Read into this what you will.
The Leisure of the Theory Class 
13 comments
October 12, 2010 at 5:34 pm
anon
Game theory is not as beautiful or hard as number theory and is not as useful as physics, according to you. Why should it be taught and why should people doing it be employed at universities and business schools?
October 12, 2010 at 5:42 pm
Anonymous
Game theory might not be as hard as number theory, but parts of it are certainly beautiful.
October 12, 2010 at 5:42 pm
michael webster
Many people both expect too much from game theory -sharp predictions- and at the same time, too little from game theory – the identification of different conventions serving the same formal purpose.
You aren’t going to get sharp predictions from game theory because of framing effects.
You are going to get a way of identifying different conventions as essential the same type of solution to a coordination problem.
Now whether that formal equality is useful or not depends upon matters outside game theory.
October 12, 2010 at 6:18 pm
Eran
anon — I don’t understand the logical relationship between your assertion and your question.
Almost everything that is done in universities is not as hard and not as beautiful as number theory. (of course beauty is subjective. personally i agree with anonymous that GT has its beauties, or i wouldn’t be here).
What you say about game theory renders it similar to most other academic disciplines. So why is it surprising that it is practiced in the universities ?
October 13, 2010 at 11:45 am
anon
Sciences are useful. Math is useful as it is useful in science. Hence, math needs to be taught. It is taught by people in math departments who are free to do whatever work they want including (potentially) useless but hard work. Game theory is not a topic that is studied nowadays in US math departments and they do not hire in game theory.
Game theory is taught and researched in econ departments and possibly in business schools. if it useless for understanding economics and business, why is it in those departments?
One solution is a department of game theory. I guess this would have few students and hence is quite unlikely to happen. If universities are getting rid of English Lit departments as they are considered useless or beucase no students want to study the topic, why would anyone want to start a game theory dept?
October 13, 2010 at 4:49 pm
anonymous
Economics and business deal with human interaction, thus they are fundamentally game-theoretic.
Parts of game theory, such as auction and matching theory, are very useful in the real world, in addition to be beautiful.
October 13, 2010 at 9:42 pm
Eran
— Indeed parts of physics have direct technological applications. Example: you need to know some physics to build an atomic bomb. However, the reason Einstein was interested in the relationship between mass and energy and the reason we have physics departments in universities is not the potential technological application. It’s because understanding the laws of nature is a valuable goal for its own sake.
— I actually think that game theory is `useful for understanding economics’, in the same sense (though not necessarily the same success) that physics is useful for understanding the laws of Nature, that English literature is useful for understanding culture, and that history is useful for understanding, well, history. However, game theory and also literature and history, don’t have `technological’ applications similar to those of physics: if you know game theory you will not be able to directly use this knowledge in policy making in the same way one can use knowledge of physics to build bombs and bridges. But as I try to say again and again, I don’t view this lack of applications as a big deal.
As for what is and what isn’t studied in math departments, I don’t understand what role this issue have in your argument, but if you mean that the only reason we have math departments is to have somebody to teach math for physicists then I think you are wrong.
October 13, 2010 at 11:19 pm
anon
My post never had anything to do with technological applications of game theory but as to whether it is useful for understanding social science at a broad level.
My understanding of Rubinstein’s post and the initial blog post is that game theory is useless for understanding anything, including economics and more broadly laws of social science. If you think it is useful for understanding laws of social science, as does Rubinstein and the original blog author, everyone is in agreement.
If someone thinks that game theory is not useful for understanding laws of social science, then all I can say is that they must believe it is a branch of math. But this is not the case, as mathematicians decide what is math and they do not in general classify game theory as math.
In summary, it seems there is some confusion about the definition of the word “useful”. Certainly the original blog says game theory is not useful for policy recommendations or predicting anything in strategic situation to the author’s knowledge. So, either you disagree with original blog post and perhaps rubinstein or there still confusion.
October 14, 2010 at 12:43 am
Eran
Every piece of knowledge is useful to understand something: knowledge of English literature is useful for understanding our culture, knowledge of history is useful for understanding our past. Game theory is useful for understanding social interactions.
Physics has an additional ‘technological’ and predictive power. It means that you can directly use knowledge of physics to build things, plan things, and predict things. Game theory has no such `technological’ (in QUOTES) power. Experts in game theory might be better at understanding economy, but I don’t believe they can translate this understanding to improve their performance in social interactions, to make better policy recommendation (which i think is the right analog for technology) or to predict human behavior in strategic interactions. Similarly while i think professors of history may have very good understanding of the past I don’t believe they are better at predicting anything about the future and I don’t think they are better at policy making.
Now if you respond may I suggest that you clarify whether you take these two assertions to have the same content:
1 — game theory is useful for policy recommendation and for making predictions
2 — game theory is useful for understanding economy
similarly:
1′ — knowledge of history is useful for policy recommendation and for making predictions
2′ — knowledge of history is useful for understanding our past / our civilization.
In case it’s not clear — I don’t take them to have the same content. Moreover, I agree with 2 and 2′ and I tend to disagree with 1 and 1′. The main purpose of my post was to say that even if 1 (or 1′) were correct, it wouldn’t make game theory (or history) more exciting for me. Before you started talking about `understanding the behavior’, everything I referred to under usefulness, including when I said `technological’, corresponds to the first sentence in each pair.
October 13, 2010 at 2:24 am
Ori
> …I have never found it useful in my own interactions with fellow human beings.
Indeed, I think that your betting history can attest to that.
October 14, 2010 at 1:49 am
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October 14, 2010 at 7:39 pm
Fernando
Eran
Your explanation and point of view are great. I just need a clarification. Game Theory, differently from ‘technological’ theories, cannot predict human behavior, improve performance in social interactions and make better policy recommendation.
Then, if Game Theory is useful for understanding social interactions, so understanding social interactions is useful for… ?
October 14, 2010 at 11:30 pm
Eran
for nothing whatsoever as far as I can tell. And I am not a bit troubled by it. For me, understanding social interactions is a worthy goal for its own sake, the same way that understanding the laws of nature was a worthy goal for Newton and Einstein, who i am pretty sure were less interested in technological application; the same way that understanding the evolution of species and the history of humanity are worthy goals.
and btw, i think in addition to helping understand social interactions game theory has plenty more juice to offer, but i will leave that to another post