Economic Games
ROUSSEAS, STEPHEN
Economic Games Minds, Markets and Money By Shlomo Maital Basic Books. 310 pp., $14.95. Reviewed by Stephen Rousseas Professor of Economics, Vassar College SHLOMO MAITAL is convinced that...
...Strategies take center stage as the players square off against each other in a world where personal greed runs counter to the common good, and the martyrdom of "solo altruism" is ruled out as inexpedient...
...If his conception of the capitalist marketplace relies largely on the outdated neoclassical theories of Alfred Marshall, who was Keynes' teacher at Cambridge, and Irving Fisher, his psychological overhaul of economics varies little from the findings that John von Neumann and Oskar Morgernstern initially advanced in The Theory of Games and Economic Behavior in 1944...
...After 280 pages of witticisms, observations and souffle analysis, what we come away with is that our current economic ills can only be cured by restructuring the work process so as to get the most out of each individual worker...
...we must return to "micro-micro-economic" foundations and build up from there to macro generalizations...
...Macroeconomics, meanwhile, lives on...
...It is not the "sentiments of the consumer" that make capitalism go round...
...Finally, he would have been well advised to pay less attention to individual attitudes toward borrowing, and more to the macro-effects of monetary policy on real output and employment...
...Repeatedly we are beaten on the head with "The Prisoner's Dilemma" and "The Tragedy of the Commons"?the classic dramatizations of how individuals make choices that will maximize their advantage over others in a world of interdependence and scarcity...
...The elegance of game theory, he states, "not only reveals the inner workings of social conflict, but it points to social institutions that can solve them...
...There is something touching-ly naive about all this...
...Let us put them to use...
...Maital would have done better to investigate the political and ideological reasons for the chronic gap between our actual output as a nation and our potential full-employment output...
...In making his case for psychology, Maital first tries to prove that it is more of a "science" than economics, and less of a forum for ideological disputes...
...The contestants will make their calculations according to the mathematical concept of expected value: "the expected value of an event as the probability it will happen, multiplied by its value if it does...
...His essential argument is the faddish one that macroeconomics as currently practiced is not valid...
...Thus the knowledge and methods of industrial psychology must be integrated into economics...
...eight Harvard students playing poker—and not much else...
...Once that is done, the individuals may be assembled into groups, and the groups in turn into a whole economy...
...He fairly showers the reader with tedious summaries of "scientific" psychological experiments, some performed by himself and his wife, Sharone...
...Time has passed Maital by both in his neoclassicism and in his insistence on micro-solutions based on individual psychology...
...Maital's true love, however, is game theory...
...Life, to Shlomo Maital, is one huge "multiple choice exam...
...Inflation, moreover, is hardly, as Maital would have it, a matter of people's willingness "to pay more than is currently being asked for some good or service...
...Nor are prices determined by supply and demand in competitive markets...
...To the author, it is a simple leap from the games of experimental psychology to those of economic risk and uncertainty...
...The key to doing this is understanding people's attitudes and motivations on the job...
...Reviewed by Stephen Rousseas Professor of Economics, Vassar College SHLOMO MAITAL is convinced that economics can be put right by incorporating discoveries from the field of psychology into its theoretical structure...
...Instead, he proposes approaching economic problems as "a game in which the human heart is in conflict with itself...
...Even more vapidly, he writes: "Inflation is always and everywhere a social and psychological phenomenon, arising from interactions among people, both in supply and demand...
...But Maital feels economists have concentrated too narrowly on "maximization mathematics," postulating optimal solutions that could only be applied in Never-Never Land...
...Rather than emphasizing the "psychological" money supply, he also would have been wiser to concentrate on the monetarist mythology that is today doing more than even the inanities of supply-side economics to wreck the economy...
...This analysis blithely ignores the ability of concentrated economic sectors to exercise their monopoly power and set prices at a markup over unit costs...
...The revelations of numerous questionnaires and Gallup polls are presented, too...
...Turgid exegesis is followed by a ton of hope and an exhortation: The axioms of game theory "make strong bricks for reconstructing the economics of uncertainty...
...Maital tacks on a few abstract models?Al" and "Burt" struggling over sharing the cost of building a road or baking bread...
...This means rediscovering "the basic roots of economics in the behavior of individual consumers, managers, workers and investors...
...Mathematics, he tells us, has revealed "the fundamental slogan of modern economics—everything depends on everything else...
...its rigor and clarity have also added much to the "science" of the discipline...
Vol. 65 • May 1982 • No. 10
