Liberalism, rationality, and Pareto optimality

Shaun Hargreaves Heap and Mehmet Ismail

No mgqh7, SocArXiv from Center for Open Science

Abstract: Rational players in game theory are neoliberal in the sense that they can choose any available action so as to maximize their payoffs. It is well known that this can result in Pareto inferior outcomes (e.g. the Prisoner's Dilemma). Classical liberalism, in contrast, argues that people should be constrained by a no-harm principle (NHP) when they act. We show, for the first time to the best of our knowledge, that rational players constrained by the NHP will produce Pareto efficient outcomes in n-person non-cooperative games. We also show that both rationality and the NHP are required for this result.

Date: 2021-01-23
New Economics Papers: this item is included in nep-gth and nep-hpe
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:mgqh7

DOI: 10.31219/osf.io/mgqh7

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