Couldn't agree more. This is a popularisation of a new wave of economics called algorithmic game theory. It's very, very cool stuff. Read more below.
Computer scientists have spent decades developing techniques for answering a single question: How long does a given calculation take to perform? Constantinos Daskalakis, an assistant professor in MIT’s Computer Science and Artificial Intelligence Laboratory, has exported those techniques to game theory, a branch of mathematics with applications in economics, traffic management — on both the Internet and the interstate — and biology, among other things. By showing that some common game-theoretical problems are so hard that they’d take the lifetime of the universe to solve, Daskalakis is suggesting that they can’t accurately represent what happens in the real world.
Game theory is a way to mathematically describe strategic reasoning — of competitors in a market, or drivers on a highway or predators in a habitat. In the last five years alone, the Nobel Prize in economics has twice been awarded to game theorists for their analyses of multilateral treaty negotiations, price wars, public auctions and taxation strategies, among other topics.
Interesting! But is not the Nash Equilibiria uncomputable( Ref. Vela's theorem). Is not there is a difference between it being an NP problem, which presumes that it is a computable proposition, but its complexity class is NP on one hand and being uncomputable perse.
I think the Zermaelo's characterization is far more elegant and has an inherent computational complexity (and search perspective) to it. Oh.. by the way, Vela is teaching a course for me on behavioural econ and we are learning about this in our classes!!
Hi Ragu,
Excellent points, but well above the line of argument the piece was aiming at. Vela's Turing Machine theorem is an even more devastating attack on orthodox GE analysis, because it takes their assumptions as given and still shows the proposition can't be written down as a formal computable function. The other tack to take is to assume the functions do what they say they do (via magic or otherwise), and ask how long it takes to compute the answer. This is the MIT guy's result. It's very interesting from a formal point of view, but all you need to do is bound the choice sets in some way or introduce some kind of bounded rationality-esque heuristic, and I'm sure the equilibrium will pop out in finite time. At least, that's my intuition.
Thanks very much for the comment!