IDEAS home Printed from https://ideas.repec.org/p/usi/wpaper/433.html
   My bibliography  Save this paper

Paradoxes versus formalism in economics. Evidence from the early years of game theory and experimental economics

Author

Listed:
  • Alessandro Innocenti

Abstract

This paper argues that the acceptance of two recent methodological advances in economics, namely game theory and laboratory experimentation, was affected by the history dependence constraining the formalization of economics. After an early period in which the two methods were coolly received by economists because their applications challenged some basic hypotheses of mainstream economics, their subsequent acceptance was the result of the corroboration of those same hypotheses. However, the recent emergence of some paradoxes has finally revealed that the effectiveness of game theory and experimental techniques in economics is improved when descriptively implausible and normatively unsatisfactory assumptions such as the centrality of individual maximization in decision theory and the definition of rationality as consistency in preferences are revised.

Suggested Citation

  • Alessandro Innocenti, 2004. "Paradoxes versus formalism in economics. Evidence from the early years of game theory and experimental economics," Department of Economics University of Siena 433, Department of Economics, University of Siena.
    • Handle: RePEc:usi:wpaper:433
    as

    Download full text from publisher

    File URL: http://repec.deps.unisi.it/quaderni/433.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Theodore C. Bergstrom, 2003. "Vernon Smith's Insomnia and the Dawn of Economics as Experimental Science," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(2), pages 181-205, June.
    2. Stephen W. Rousseas & Albert G. Hart, 1951. "Experimental Verification of a Composite Indifference Map," Journal of Political Economy, University of Chicago Press, vol. 59(4), pages 288-288.
    3. Schotter, Andrew & Schwodiauer, Gerhard, 1980. "Economics and the Theory of Games: A Survey," Journal of Economic Literature, American Economic Association, vol. 18(2), pages 479-527, June.
    4. Robert J. Leonard, 1995. "From Parlor Games to Social Science: Von Neumann, Morgenstern, and the Creation of Game Theory, 1928-1994," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 730-761, June.
    5. Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70(3), pages 322-322.
    6. J. Barkley Rosser Jr, 2003. "Weintraub on the evolution of mathematical economics: a review essay," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 25(4), pages 575-589.
    7. Boland, Lawrence A, 1981. "On the Futility of Criticizing the Neoclassical Maximization Hypothesis," American Economic Review, American Economic Association, vol. 71(5), pages 1031-1036, December.
    8. Binmore, Kenneth G. & Samuelson, Larry, 1992. "Evolutionary stability in repeated games played by finite automata," Journal of Economic Theory, Elsevier, vol. 57(2), pages 278-305, August.
    9. Liebowitz, S J & Margolis, Stephen E, 1995. "Path Dependence, Lock-in, and History," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 205-226, April.
    10. J. W. Friedman, 1969. "On Experimental Research in Oligopoly," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 36(4), pages 399-415.
    11. Roger E. Backhouse & John Creedy (ed.), 1999. "From Classical Economics to the Theory of the Firm," Books, Edward Elgar Publishing, number 1824.
    12. Frederick Mosteller & Philip Nogee, 1951. "An Experimental Measurement of Utility," Journal of Political Economy, University of Chicago Press, vol. 59(5), pages 371-371.
    13. R. Myerson, 2010. "Nash Equilibrium and the History of Economic Theory," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 6.
    14. Vernon L. Smith, 1992. "Game Theory and Experimental Economics: Beginnings and Early Influences," History of Political Economy, Duke University Press, vol. 24(5), pages 241-282, Supplemen.
    15. Rubinstein, Ariel, 1991. "Comments on the Interpretation of Game Theory," Econometrica, Econometric Society, vol. 59(4), pages 909-924, July.
    16. Rubinstein, Ariel, 2001. "A theorist's view of experiments," European Economic Review, Elsevier, vol. 45(4-6), pages 615-628, May.
    17. Roth, Alvin E., 1993. "The Early History of Experimental Economics," Journal of the History of Economic Thought, Cambridge University Press, vol. 15(2), pages 184-209, October.
    18. Blaug, Mark, 2003. "The Formalist Revolution of the 1950s," Journal of the History of Economic Thought, Cambridge University Press, vol. 25(2), pages 145-156, June.
    19. Innocenti, Alessandro, 1995. "Oskar Morgenstern and the Heterodox Potentialities of the Application of Game Theory to Economics," Journal of the History of Economic Thought, Cambridge University Press, vol. 17(2), pages 205-227, October.
    20. Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, vol. 56(4), pages 279-279.
    21. Nicola Giocoli, 2001. "Fixing the point: the contribution of early game theory to the tool-box of modern economics," Journal of Economic Methodology, Taylor & Francis Journals, vol. 10(1), pages 1-39.
    22. Schram, Arthur, 2000. "Sorting Out the Seeking: The Economics of Individual Motivations," Public Choice, Springer, vol. 103(3-4), pages 231-258, June.
    23. Backhouse, Roger E, 1998. "If Mathematics Is Informal, Then Perhaps We Should Accept That Economics Must Be Informal Too," Economic Journal, Royal Economic Society, vol. 108(451), pages 1848-1858, November.
    24. Philip Mirowski, 1992. "What Were von Neumann and Morgenstern Trying to Accomplish?," History of Political Economy, Duke University Press, vol. 24(5), pages 113-147, Supplemen.
    25. Urs Rellstab, 1992. "New Insights into the Collaboration between John von Neumann and Oskar Morgenstern on the Theory of Games and Economic Behavior," History of Political Economy, Duke University Press, vol. 24(5), pages 77-93, Supplemen.
    26. Plott, Charles R, 1982. "Industrial Organization Theory and Experimental Economics," Journal of Economic Literature, American Economic Association, vol. 20(4), pages 1485-1527, December.
    27. Friedman, Daniel, 1996. "Equilibrium in Evolutionary Games: Some Experimental Results," Economic Journal, Royal Economic Society, vol. 106(434), pages 1-25, January.
    28. William H. Riker, 1992. "The Entry of Game Theory into Political Science," History of Political Economy, Duke University Press, vol. 24(5), pages 207-223, Supplemen.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alessandro Innocenti, 2008. "How can a psychologist inform economics? The strange case of Sidney Siegel," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 0808, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.
    2. Sandye Gloria-Palermo, 2013. "In Search of the Right Tool: From Formalism to Constructivist Modelling," GREDEG Working Papers 2013-33, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    3. Sandye Gloria-Palermo, 2010. "Introducing Formalism in Economics : von Neumann's growth model reconsidered," Post-Print halshs-00726348, HAL.
    4. Innocenti, Alessandro, 2010. "How a psychologist informed economics: The case of Sidney Siegel," Journal of Economic Psychology, Elsevier, vol. 31(3), pages 421-434, June.
    5. Sandye Gloria-Palermo, 2010. "Introducing Formalism in Economics: The Growth Model of John von Neumann," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(2), pages 153-172, June.
    6. Sent, Esther-Mirjam, 2004. "The legacy of Herbert Simon in game theory," Journal of Economic Behavior & Organization, Elsevier, vol. 53(3), pages 303-317, March.
    7. Nicolas Vallois & Dorian Jullien, 2017. "Estimating Rationality in Economics: A History of Statistical Methods in Experimental Economics," Working Papers halshs-01651070, HAL.
    8. Kakarot-Handtke, Egmont, 2010. "Axiomatic Basics of e-Economics," MPRA Paper 24331, University Library of Munich, Germany.
    9. Nicolas Vallois & Dorian Jullien, 2018. "A history of statistical methods in experimental economics," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 25(6), pages 1455-1492, November.
    10. Croson, Rachel & Gächter, Simon, 2010. "The science of experimental economics," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 122-131, January.
    11. Sandye Gloria-Palermo, 2013. "Equilibrium versus Process: A Confrontation between Mainstream and Austrian Ontology," GREDEG Working Papers 2013-39, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    12. Nicolas Vallois & Dorian Jullien, 2017. "Estimating Rationality in Economics: A History of Statistical Methods in Experimental Economics," GREDEG Working Papers 2017-20, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    13. Turan Yay & Huseyin Tastan, 2010. "Invisible Hand in the Process of Making Economics or on the Method and Scope of Economics," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(1), pages 61-83, March.
    14. Davis, Douglas D. & Holt, Charles a., 1993. "Experimental economics: Methods, problems and promise," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 8(2), pages 179-212.
    15. Andreas Ortman, 2013. "Episodes from the Early History of Experimentation in Economics," Discussion Papers 2013-34, School of Economics, The University of New South Wales.
    16. Romaniuc, Rustam, 2017. "Intrinsic motivation in economics: A history," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 67(C), pages 56-64.
    17. Giocoli, Nicola, 2008. "Three alternative (?) stories on the late 20th-century rise of game theory," MPRA Paper 33808, University Library of Munich, Germany.
    18. Fiore, Annamaria, 2009. "Experimental Economics: Some Methodological Notes," MPRA Paper 12498, University Library of Munich, Germany.
    19. Luca Lambertini, 2013. "John von Neumann between Physics and Economics: A methodological note," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 5(2), pages 177-189, December.
    20. Duffy, Sean & Smith, John, 2024. "The random thickness of indifference," MPRA Paper 122165, University Library of Munich, Germany.

    More about this item

    Keywords

    paradoxes; game theory; experiments; individual maximization; economic rationality;
    All these keywords.

    JEL classification:

    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usi:wpaper:433. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Fabrizio Becatti (email available below). General contact details of provider: https://edirc.repec.org/data/desieit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.