Rational Conflict.

This is a philosophical book about economic methodology primarily dealing with the "rationality" of game theoretic models particularly as applied to conflict. Rationality is defined as "the ability to submit |one's~ options to the critical assessment of Reason,"--a type cognitive process "that requires no understanding of the thought process of other human beings." Conflict is defined to be any instance in which agents intentionally destroy assets to promote their own interests. It includes such "antisocial" behavior as war which destroys natural resources, and worker strike activity which diminishes production and depletes economic resources. The primary question is whether neoclassical game theoretic approaches (e.g., Brams |1~, Myerson |2~, Rapoport |3; 4~) are capable of "rationally" analyzing conflict. The book argues they are not and provides some suggestions for improvement.

After a two chapter introduction (Part I), the first laying out the issues and the second illustrating them by way of Greek mythology, the book is essentially divided into two additional parts. One (Part II) is a four chapter survey of game theory's intricacies as applied to conflict. It concludes with a chapter describing how game theory attains equilibria by assumption instead of Reason, which the author claims is faulty logic. Part III attempts to provide some fixes.

Assuming one believes in learning by doing, Part II serves as a game theory primer emphasizing game theory's assumptions and again referring back to examples from Greek mythology such as Prometheus's deliverance of fire to humanity in defiance of Zeus to whom he was previously loyal. It is divided into four chapters. Among others Chapter 3 deals with prisoner's dilemma, the game which illustrates how paradoxically rationality can lead to conflict, making both parties worse off than if somehow they could cooperate which in reality they individually prefer. Only with an all powerful "Titanic Leviathan" restricting both parties to behave cooperatively can peace come about--hence the famous Hobbsian Leviathan trap. But imposing peace as such is beyond game theory. This is an example of irrationality. Even more complicated sequential games (Chapter 4) don't alter the story: "War is what happens when agents skillfully set and reset control variables in a struggle to survive the jungle of antagonistic objective functions."

On the other hand whereas in non-cooperative games there is no room for cooperation, in cooperative games (Chapter 5) there is "virtually no room for conflict." Cooperative games imply that a theory of rational conflict is only possible when rational persons cannot communicate |perhaps~ because of institutional constraints." In short, game theory can yield different results depending on the payoff matrices and depending on rules of play.

But is this pessimistic view of the inevitability of war really "rational" or are there problems with the game theoretic logic and hence "rationality"? Part III, divided into two chapters, suggests several logical alternatives: one "monistic" in which player participants choose "the deviant strategy as a strategic self-deceiver or an ingenious akratic;" a second "dualistic," borrowing from Freud, in which players can simultaneously be both rational and irrational at any time being motivated in opposite directions by their conscious and subconscious; and a third "dialectical" which "sees the juxtaposition between Reason and Unreason not as a perennial conflict between well-demarcated opposites but as a necessary aspect of a larger configuration that renders them both partial and temporary." The book concludes with a final chapter illustrating how a socially conscious individual often exhibits behavior different than "expected on the basis of the individualist accounts of past chapters."

Throughout Part II the author hints at what he expresses more explicitly in Part III: that indeed neoclassical game theory might not be the panacea necessary to understand conflict. Although the results have disappointed many who looked for great things from game theory, my feeling is that the book is too harsh. Yes, game theory has limitations but game theory is young, being developed only as early as 1928 |5~. Certainly game theory doesn't offer all the answers, but then again neither does any other analytic device. One cannot dismiss game theory merely because any one game inadequately describes (or predicts) conflict, just like one cannot dismiss calculus because any one calculus model inadequately describes or predicts consumer behavior. Obviously computing the specific payoff matrix is important but so is computing a function's specific parameters in calculus. Worrying about whether conclusions based on a two-person cooperative game contradict the conclusions based on a two-person non-cooperative game is no more troubling than worrying about whether conclusions based on multivariate calculus or differential equations models differ from a catastrophe model.

In short, Rational Conflict raises some interesting inadequacies of game theory and its application to conflict, but in my opinion it is far too critical. Clearly current applications of game theory have its shortcomings, and clearly some of what Varoufakis suggests represent very insightful ideas. On the other hand, it is not clear that Rational Conflict develops these ideas sufficiently to be able to use them to better model and eventually predict cooperation and conflict. In addition game theory is not the only technique to model conflict. Perhaps some of Varoufakis's criticism can be applied to these other approaches as well.

3. Voprosy ekonomiki was considered to be the top economic journal in the former USSR. It is a product of the Academy of Sciences.

References

1. Brams, Steven J. Superpower Games: Applying Theory to Superpower Conflict. New Haven: Yale University Press, 1985.

2. Myerson, Roger B. Game Theory: Analysis of Conflict. Cambridge, Massachusetts: Harvard University Press, 1991.

3. Rapoport, Anatol. Fights, Games, and Debates. Ann Arbor: University of Michigan Press, 1960.

4. -----, editor. Game Theory as a Theory of Conflict Resolution. Dordrecht and Boston: D. Reidel Publishing Co., 1974.

5. von Neumann, John, "Zur Theorie der Gesellschaftsspiele," Math. Annalen, 1928, 100:295-320.