Saturday, October 17, 2020

"The Curse of Game Theory: Why It’s in Your Self-Interest to Exit the Rules of the Game"

Just a heads-up, I don't know these folks or know what their agenda is. But the essay is interesting.

From the Rising Tide Foundation:

Game theory, the mathematical theory of games of strategy, was developed by John von Neumann in several successive stages in 1928 and 1940-41, according to his book “Theory of Games and Economic Behaviour” which he co-authored with Oskar Morgenstern.

The crux of the theory is that an individuals’ behaviour will always be motivated towards achieving an optimal outcome, which is determined by self-interest. An assumption made is that the players in such a game are rational, which translates to, “will strive to maximize their payoffs in the game”. In other words, it is assumed they are motivated by selfish self-interests.

Over the years, other contributors such as John Nash (Nash equilibrium) and John Maynard Smith (evolutionary stable strategy) have added to the theory and we are now at a point where it is considered by many to be an essential tool when modelling economic, political, sociological or military behaviours and outcomes, and is taught as such in many prestigious universities as something pretty much set in stone.

But what if we have made a terrible mistake?

After all, it is acknowledged by the theorists themselves that the entire functioning of their model relies upon the assumption that we are governed by rational selfish behaviour, and that they feel confident about this assumption since reality has apparently confirmed this fact to them. But what if this game is not objectively mirroring a truthful depiction of us? What if this game has rather, been used as a conditioning tool, a self-fulfilling prophecy, a positive feedback loop?

How can we know what is true? How can we know what kind of a person we truly are and not what we have been conditioned to think of ourselves as?

Theory of Games and Economic Behaviour

Before we can answer such a question, we need to look at the forms of simplification and assumptions that were used by von Neumann when formulating the philosophy to the game theory model. This may be counter-intuitive to some, but the “philosophy” or “hypothesis” must always precede the actual model. The variables you choose to use, the variables you discount for, how you define the variables, how you define the relationship between the variables are not being defined by the model, but rather the creator of the model. Once the model is created it can now, theoretically, add to that beginning structure and mimic a simplified version of reality.

However, we should keep in mind that a model that has been created on a false hypothesis could still “function,” if the variables are not too much in contradiction to the other variables’ operations. Such a model is not “aware” that it is not a representation of “reality,” and cannot indicate so to its creator. Thus, a model can be a representation of a simplified reality or it can represent a completely artificial reality.

At the beginning of von Neumann’s book, he goes through several disclaimers which are highly problematic towards the relevance of his theory, one of them being the acknowledgement that “there exists, at present, no satisfactory treatment of the question of rational behavior. There may, for example, exist several ways by which to reach the optimum position; they may depend upon the knowledge and understanding which the individual has and upon the paths of action open to them, because they imply, as must be evident, quantitative relationships.”

As becomes rapidly evident, von Neumann makes endless assertions such as these, as if they were obvious and thus need not be examined at all. The assumption that an under-defined “rational” selfish behaviour is merely quantifiable and nothing more, and does not account for qualitative change (a mathematician’s worst nightmare), is taking great liberty in over-simplifying human behaviour to conveniently fit the limited parameters of his model. In other words, it is cheating. You are manipulating the definitions and interactions of your variables to fit an artificial reality of your model.

Let me give you an example.

In Euclid’s fifth postulate, it is considered a “rule” that two parallel lines will never intersect. Euclid was alive around the time of the mid-4th century BCE, before Eratosthenes (276-194 BCE) made his beautifully elegant discovery that the Earth was indeed curved and also made a pretty accurate first measurement of the size of Earth.

That is, Euclid assumed a linear geometric space upon which the real universe was expected to “fit”. While it is true that two parallel lines will never meet on a two-dimensional plane, they can meet on a three-dimensional plane.

As is now understood, line A and line G, can be measured as 90 degrees from the equator line and thus are parallel lines, and yet they can eventually interface with each other if the surface is curved [see image].

The problem with assumptions such Euclid’s is that they are ultimately only true in an artificial situation and are not reflective of how such things will interact in reality. Also, there is no way to predict from Euclid’s fifth law, how two parallel lines would interact in a three dimensional space, let alone in n dimensional space as described by the physicist Bernard Riemann.

Ironically, in his book, von Neumann likens his “pioneering” work in the field of game theory to that of what physicists have been doing for centuries, that is, mathematical formulations that represent, albeit simplified, the “laws of nature,” concerning matter and energy. However, von Neumann again showcases that he has no comprehension as to what constitutes the foundation for such “laws of nature.”

In his Hypotheses that Lie at the Foundation of Geometry and other works, Riemann rigorously developed the notion of an anti-Euclidean physical space time shaped not by linear dimensions of an “x,y,z grid”, but rather dimensions defined by an ever growing array of discovered physical principles such as magnetism, light, heat, gravity, sound, etc.- each organizing principle being ironically characterized by both a finiteness and unboundedness with quantized least-action pathways discoverable therein.

According to Euclid’s logic, you never “see” two parallel lines intersecting and thus it is unfathomable that they ever could intersect. His “rule” was based off of shared assumptions of what we “think” we are observing in such phenomena, however, this is not necessarily reality and it certainly does not translate to a “rule” that governs all.

By von Neumann acknowledging that he himself is heavily relying on his so-called “self-evident” truths in simplifying human behaviour, he is asserting an outcome, he is not proving the outcome’s natural occurrence. 

The Robinson Crusoe example in Monetarist Economic Theory

According to von Neumann, the Robinson Crusoe example was used by the Austrian economic school to model an individual’s behaviour towards maximizing pay-off in an environment (in this case an island) where the resources available to you are set and limited....