Why study Game theory when it has limited practical applications in real life?

I was just amazed to read this interview of Ariel Rubinstein. Someone who is so famous for his game theory work actually feels it does not really have  much practical usage. He actually encourages people to write a book which shows limitations of game theory! He also talks about why so many Israelis take up game theory (because of Aumann effect) etc.

I was so surprised to read the interview that had to re-read it many times to be sure whether I have not read it wrong ..

He starts by saying much of game theory is based on the typical econ assumption of rationality. So you feel as if he will tell you the new ideas emerging etc in GT. However what you get instead is this:

What are the applications of game theory for real life?



He thinks much of the books which say GT is very useful are plain marketing gimmicks:





Why study it then?

Why do it then?




None. Not only none, but my point would be that categorically game theory cannot do it. Maybe somewhere in a Sherlock Holmes or Agatha Christie story there was a situation where the detective was very clever and he applied some logical trick that somehow caught the criminal, something like that. You know in America there was a programme on CBS, called Numbers, written Numb3rs, with the ‘e’ reversed. Numb3rs wanted to make people curious about mathematics through detective stories. I happened to hear about it because I had done some experimental work with Amos Tversky and Dana Heller, about the game of hide and seek. In one of the episodes they refer to the paper. Of course it was a joke, but the fact that my name was mentioned in such a programme made me very happy. But outside such programmes, I categorically cannot see any case where game theory could be helpful.

He says people simply study it as they love it.

He then picks his books. The one on Nash and his views on Nash are interesting:

Time to talk about your next book, A Beautiful Mind.

This book is completely different. I picked it because when you think about the field you think also about the people who were involved. Of course the story of Aumann, the story of many other people, is interesting, but Nash’s story also has a message. The message is completely separate from game theory, but nevertheless, it happened around the development of game theory. Sylvia Nasar’s book is a brilliant book because she made a deliberate decision not to explain game theory. What she describes is a human drama.

Sylvia Nasar was a reporter for the New York Times when she covered the success of the [telecommunications] spectrum auctions in 1994. The auction was described – in my opinion wrongly – by the popular press and by some game theoreticians as the glorious success of the field of game theory, in terms of making it applicable. But in any case, the success was in contrast to the misery of one of its important contributors, John Nash.

Hmm…So was much of what Nobel Prize Committee and so many others have been saying wrong things?

Finally on his fifth book. There is no pick. He is waiting for the right one:

So, your last book. You told me it was going to be a surprise.

Yes, I promised you a surprise as the fifth book. The fifth book is a book that has not been written yet. That’s the point. The fifth book is a lacuna, it’s a space that has to be filled. The book which, in my opinion, is so much waiting to be written is a book that will criticise game theory. Not from a sociological point of view, not a personality analysis of people like Aumann or Shapley or Schelling or whoever, but a purely intellectual analysis. There is a need for a book that counters the natural tendency of people to find in game theory solutions to problems that in my opinion game theory doesn’t say anything about. I’ve tried to do something small in this direction, in a book – EconomicFables – that has been published in Hebrew. It’s going to be on the web in English very soon, for reading in Google Books. But my book is not more than a call for such a book.

Why do so many Israelis take up GT then? It is Aumann effect:

People ask, “Why is game theory so popular in Israel?” One explanation is Aumann’s charming personality. His role in Israeli game theory reminds me of that of a rabbi in Jewish orthodox communities. Another explanation is the traditions among religious Jews – which have also had an effect on non-religious Jews – of the study of the Talmud. The study of the Talmud is not practical. For example, scholars of the Talmud were studying the question of what to do in the temple place during the entire 2,000 years we were disconnected from Jerusalem. One of the things that is beautiful about the Talmudic thinking is that it’s based on study of examples. The examples are very simple scenarios which demonstrate something deep. I believe that Aumann is influenced by this Talmudic way of thinking.


Stirring stuff from Prof. Ariel. Here is a counterpost on why GT is useful..

Rubinstein himself wanted to be a lawyer actually. Why he got into eco and GT? This explains:

Like everything else in Ariel Rubinstein’s life, the origins of his involvement with economic theory should be sought in his childhood in pre-1967 Jerusalem. One day in the mid 60’s, Ariel went to a newspaper booth in Tel-Arza neighborhood and asked the vendor for a dirty magazine. As it turns out, the vendor was a communist, and so he gave Ariel a pack of old Econometrica issues from the early 1950s. He pointed out a particularly filthy paper by Arrow and Debreu in the 1954 volume. As young Ariel leafed through the yellow pages, he instantly fell in love. This was the birth of a stupendous career.

This is really funny..


On similar lines Abhijit Banerjee tried to answer the question on why so many Bengalis opt for economics in India? The answer was similar to Ariel’s. It is not in the genes of Bengalis but great economics teachers in Bengal:

On a recent trip somewhere, a Uruguayan economist I just met asked me if I was a Bengali: “Aren’t all Indian economists Bengali and all Indian mathematicians south Indian?” I demurred, pointing to that great triad of non-Bengali economists, Bhagwati, Dixit and Srinivasan, but like many stereotypes there is a kernel of truth in it; it’s still not possible to open an issue of certain journals without noticing a Bengali name or two.

 How did this come about? Amartya Sen notwithstanding, it is not because of something in the Bengali genes. If I had to guess it has much more to do with a couple of generations of outstanding teacher-scholars in Kolkata who, implausibly (remember the old joke: “an accountant is an economist with charisma”) managed to turn economics into the sexiest thing that you could study. Those wonderful teachers are now, alas, mostly all gone. We lost one of last remaining of them, Tapas Majumdar, in the middle of October.


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