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 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 established the nature of the problem, it considers three alternative interpretations (Humean, postmodern and Hegelian) of why the problem resists logical solutions and of its significance for social theory.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Price includes VAT (USA)
Tax calculation will be finalised during checkout.
Aristotle: 1987,Nicomachean Ethics, transl. by J. Welson, Prometheus, New York.
Bernheim, D.: 1984, ‘Rationalisable Strategic Behaviour’,Econometrica 52, 1007–28.
Binmore, K.: 1987, 1988, ‘Modeling Rational Players: Parts I and II’,Economics and Philosophy 3, 179–214 and4, 9–55.
Derrida, J.: 1978,Writing and Difference, Routledge and Kegan Paul, London.
Finelli, R.: 1990, ‘Production of Commodities and Production of Images: Reflection on Modernism and Postmodernism’, mimeo, Faculty of Philosophy, University of Rome.
Foucault, M.: 1967,Madness and Civilisation, Tavistock, London.
Harsanyi, J.: 1973, ‘Games with Randomly Disturbed Payoffs: a New Rationale for Mixed Strategies’,International Journal of Game Theory 2, 1–23.
Hegel, G. W. F.: 1931,The Phenomenology of Mind, translated by J. Baillie, London.
Kirsch, J.: 1966,Shakespeare's Royal Self, Putnam and Sons, New York.
Kreps, D., P. Milgrom, J. Roberts, and R. Wilson: 1982, ‘Rational Cooperation in the Finitely Repeated Prisoner's Dilemma’,Journal of Economic Theory 27, 245–52.
Levi-Strauss, C.: 1966,The Savage Mind, Weidenfeld and Nicholson, London.
Lyotard, J.-F.: 1984,The Postmodern Condition: A Report on Knowledge, Manchester University Press, Manchester.
Norris, C.: 1985,The Contest of Faculties: Philosophy and Theory After Deconstruction, Meuthen, London.
Nietzsche, F.:On Truth and Falsity in their Ultramoral Sense, in Levy, O.: 1964,The Complete Works of Friedrich Nietzsche, New York.
Peirce, C. S.: 1932,Collected Papers Vol. 2, Harvard University Press, Cambridge Mass.
Pettit, F. and R. Sugden: 1989, ‘The Paradox of Backward Induction’,Journal of Philosophy,LXXXVI, 169–82.
Skyrms, B.: 1990,The Dynamics of Rational Deliberation, Harvard University Press, Cambridge Mass.
Sugden, R.: 1989, ‘Game Theory without Backward Induction’, mimeo, University of East Anglia.
Sugden, R.: 1989b, ‘Spontaneous Order’,Journal of Economic Perspectives,3, 118–25.
Sugden, R.: 1991, ‘Rational Choice: A Survey of Contributions from Economics and Philosophy’,The Economic Journal 101, 751–85.
Varoufakis, Y.: 1991,Rational Conflict, Basil Blackwell, Oxford.
I am indebted to Bob Sugden for introducing me to rational deviance, to Roberto Finelli for some important associations, to Shaun Hargreaves-Heap for the time we spent arguing about the postmodern condition, and to Joseph Halevi for his dialectical intransigence. Nonetheless, this paper should be blamed entirely on me.
About this article
Cite this article
Varoufakis, Y. Modern and postmodern challenges to game theory. Erkenntnis 38, 371–404 (1993). https://doi.org/10.1007/BF01128237
- Social Interaction
- Game Theory
- Basic Result
- Social Theorist
- Alternative Interpretation