Game Theory and Public Policy
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Game Theory and Public Policy

Roger A. McCain

Game theory is useful in understanding collective human activity as the outcome of interactive decisions. In recent years it has become a more prominent aspect of research and applications in public policy disciplines such as economics, philosophy, management and political science, and in work within public policy itself. Here Roger McCain makes use of the analytical tools of game theory with the pragmatic purpose of identifying problems and exploring potential solutions in public policy.
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Chapter 3: A Brief Interpretive History of Game Theory

Roger A. McCain


Game theory has, of course, a prehistory; but much as we can say that economics (as a distinct field of study) began with Adam Smith’s 1776 Wealth of Nations (Smith, 1994), so we can say that game theory began with von Neumann and Morgenstern’s 1944 book, The Theory of Games and Economic Behavior (von Neumann and Morgenstern, 2004). Accordingly we shall pause only briefly over the prehistory. In 1913, Zermelo had initiated the mathematical literature on analysis of games. Borel had written important papers that seem to have influenced von Neumann (see Poundstone, 1992, pp. 41–2). With a presentation in 1926 and publication of the corresponding paper in 1928 (von Neumann, 1959), von Neumann had set out many of the themes that would recur in his book with Morgenstern, to which we will return. Aumann and Maschler (1985) find a cooperative solution concept in the Babylonian Talmud. A Korean scholar suggests to me that Sun Tzu should be considered a game theorist1. Indeed it is likely that insights of game theory have often occurred to thoughtful people engaged in their own conflicts throughout much of history. See Paul Allen’s website for a schematic history of game theory, including several other “prehistoric” contributions (Allen, 1998). Morgenstern had used his example of Sherlock Holmes and Moriarty to illustrate problems of interactive decision, relating them to economics and forecasting, in a 1928 book and a 1935 paper (TGEB, pp. 712–142). By the mid-1930s the convergence of his ideas with those of...

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