Postmodern Challenges to Game Theory

Yanis Varoufakis

No 162, Working Papers from University of Sydney, School of Economics

Abstract: Equilibrium game theory borrows from neoclassical economics its rationality concept which it immediately puts to work in order to produce the basic results it needs for building an elaborate narrative of social interaction. This paper focuses on some recent objections to game theory's use of rationality assumptions in general, and of backward induction and subgame perfection in particular, and interprets them in the light of the postmodern critique of the grand meta-narratives which social theorists often rely on for social explanation. The paper subsequently presents a defence of game theory which seeks to accommodate the postmodern critique. However, it goes on to show that such a defence is illegitimate and claims that the problem lies with the faulty conceptualisation of the main concept on which game theory rests: that of Reason. Having called for a different perception of rationality, the paper pits the postmodern view against Hegelian dialectics and sides with the later.

Date: 1991-08
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