Tuesday, December 07, 2004

Other People Think, Too

Kieran Healy adds to the commentary on Posner. A bit of the way down he has a point that should have been obvious to me given that I've just been doing a bit of game theory. But I'm not designed to think strategically so I missed it:
In the case of cost-benefit arguments about preventive war, there are other objections. One, pointed out by Chris in the comments to my earlier post, is the the worry that your adversaries are thinking about preemptive attacks in much the same way you are, and so will move to preempt your preemptive attack with one of their own. You can still be committed to weigh up the costs and benefits as best you can, but it would be foolish to think one had a straightforward technique that cut through the difficulty and reduced it to a matter of simple calculation. One of the most important contributions of game theory is the way it reorients your thinking from a parametric to a strategic point of view. That is, you stop thinking of other agents as passive bits of the world and realize that they, like you, are searching for the smartest decision given what they anticipate their opponents will do. If you’re inspired by rational choice theory, as Judge Posner is, the simple application of cost-benefit methods should not look very plausibly as a way of reaching a strategic decision about the use of preventive action in cases like Iraq.
Realizing that other people aren't stupid and react and adapt to what you do is one of those key insights of modern economics (particularly rational expectation-type macro) which have to be rediscovered and rediscovered because it is so tempting to think of others as so simple. Alas, others are sentient beings too.

Update: Or, to tie this into my previous post, game theory isn't covered in intro. econ. Thus, Posner doesn't consider it.

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