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Is game theory a branch of behavioral economics?


No. Game theory is pure mathematics and therefore is not a branch of economics at all. Game theory says that certain courses of action have certain payoffs under certain conditions. Game theory does not say whether those conditions hold. Nor does it say how people act on those conditions, supposing that they do hold. Economics is concerned with what people actually do under circumstances that actually hold, not with what they should do under circumstances that don’t hold. Therefore, game theory is not a part of economics. Supposedly, game theory helps ‘illuminate’ economic phenomena. The idea is that actual economic behavior can be understood in game-theoretic terms. A given person’s economic behavior can be predicted, it is alleged, if it is known what he believes his ‘payoff matrix’ to be. But game theory doesn’t tell us how to figure out what someone believes his payoff matrix to be, and game-theory is completely useless until we have that information. Moreover, acquiring that information would involve the use of investigative instruments far more powerful than anything game theory has to offer, with the consequence that, once we know enough to apply game theory, we no longer have any use for it. Game theory is always explained in terms of totally artificial situations, because it only applies to such situations. There is no way to apply it without already having the information that it is being used to generated, and game theory is therefore useless. And it’s not just useless. It’s negatively useful, since any attempt to apply it involves making false and unrealistic assumptions about real-world conditions. Game theory gives a veneer of mathematical rigor to economics, and that is why economists make such heavy weather of it. But game theory cannot be used until we already have the knowledge it is supposed to give us, and attempts to use in the absence of this knowledge make that knowledge even harder to acquire than it would otherwise be. And game theory is therefore the very definition of scientific failure. 20 views · Answer requested by Lay Mazda

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