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Answering your questions
Who knows, maybe I'll try to get to them all. Here's the first:
What impact will algorithmic game theory have on economics?
I'd start by asking: will game theory pure and simple have (further) impact on economics? And I'd say basically "no." The common concepts and tricks of game theory are invaluable but we already have those and I don't see any more coming down the pike. Algorithmic game theory will address problems internal to game theory and within that context it will flourish. Finding equilibria, and discriminating among multiple equilibria, are otherwise very difficult problems and AGT is a natural way to crack those nuts. So AGT will have continued practical applications in computer science and problems of engineering. But it won't much affect how most economists think about the world or do their research.
As for NBA analysis, I'll just say that a) Boston is still an odds-on favorite, b) No one ever really told us what happened to Andrew Bynum, and c) Even though Phoenix probably won't make it, the Shaq trade was very clearly a good idea and all you doubters should offer up mea culpas.
Posted by Tyler Cowen on April 21, 2008 at 04:05 PM in Economics | Permalink
Comments
We often think of an equilibrium as a calculation, sometimes easy (two curves intersecting), sometimes huge (millions of people interacting). In any case, there is a theoretical possibility of calculating the equilibrium, even though it is generally not feasible for lack of knowledge and computing power. So it is not impossible that the market indeed 'tends toward equilibrium'.
But for some companies the discovery an algorithm can result in improving their P&L. Google, or the Netflix contest come to my mind, but this is true of brick & mortar companies, too. In this case, there is no possibility - not even theoretical - to be sure that a given strategy is optimal. The only proof of this kind of pudding is in the eating. Maybe this could influence the way we think about equilibrium in economics.
Posted by: Stephane at Apr 21, 2008 4:36:26 PM
I'm all for conspiracy-mongering, but I don't know what to make of the Andrew Bynum reference. Here in Socal, the details have been offered consistently. In January, he briefly dislocated a kneecap, a grotesque, unusual injury that has not responded as hoped to treatment. Three months after the injury, he still suffers swelling when he works out. Few people think he will play until June at the earliest, and that can only happen if the Lakers make the finals.
Posted by: Chris at Apr 21, 2008 5:41:19 PM
Hmmm, mea culpa?
Marion +7 on court/off court for the Suns this year; Shaq +.4. (I thought at the time of the trade that they were probably better off not even playing him, but he's been fine.)
Win shares/loss shares: Marion-20:2; Shaq-5:4. Marion got hurt, but Shaq was a much much bigger injury risk at the time of the trade.
He has kind of improved their interior defense just by being big, and by not being Amare, but he's also a terrible defender. And of course Marion is a great defender...
Remains one of the dumber trades out there.
Posted by: Mike at Apr 21, 2008 5:42:37 PM
Tyler what about evolutionary game theory's effect on behavioral economics?
Posted by: Adam at Apr 21, 2008 8:55:37 PM
I think it is pretty obvious that if they had Marion instead of Shaq, Tim Duncan would have never been left wide open to hit the game tying 3 point jumper with seconds left.
Posted by: Jay at Apr 21, 2008 9:42:18 PM
"The common concepts and tricks of game theory are invaluable but we already have those and I don't see any more coming down the pike.": isn't the whole point of new discoveries that we didn't see them coming?
Posted by: Jim at Apr 21, 2008 9:43:10 PM
I used html tags in the last post to denote sarcasm. Guess they didn't show up.
Posted by: Jay at Apr 21, 2008 9:43:48 PM
Tyler, what about the possibilities of AGT of increasing our understanding which games have solutions that are computationally easy to find and which do not and it's impact on our understanding on what problems in real life tend to have faster trajectories towards equilibrium and which ones happen on longer evolutionary scales? Or how about going a bit further, and bringing in the theory of distributed computation and complexity within - which may give us better understanding on issues like, when can a market efficiently solve a problem and when does the problem tend toward pushing certain group of information into single hands (because some problems give much faster solutions computationally, if one can do things centrally).
Posted by: Mikko at Apr 21, 2008 11:56:22 PM
Is the free rider problem really that much of a problem?
In politics, the first, last, and most effective justification given for just about every plausibly useful government program from public education to national defense is that one must pay "his share" to the cost of a civil society.
Well, nevermind that we spend more on national defense than all other nations combined and our borders are sieves. Nevermind that our schools suck. Anyway, is the free-rider argument really all that important.
My personal opinion is that capitalism provides the luxury of having a bloated and bellicose defense and the luxury of having lax schools.
Posted by: Andrew at Apr 22, 2008 4:18:09 AM
Impressed by your NBA knowledge - the fact that you know how important Andrew Bynum's presence is to this NBA playoff season is impressive. I know of several sports columnists / talking heads who seem to have forgotten about Bynum, and don't understand what kind of impact he may have.
Anyway, to answer your question about what happened to Bynum, its a bit murky. We know he had a major bone bruise and some other damage to the knee. We think that there has been no ligament tears. He has not undergone surgery. He has recently sought a second opinion from a NY surgeon who treated his knee for a previous high school knee injury. That surgeon seems to have agreed with the Lakers (there is some confusion about this) that Bynum was not ready to resume play at the end of the regular season, and Bynum's return was then put on hold. There has been no timetable reported for his recovery and return to play. There has been reported swelling and pain in the knee.
In any event, everyone now seems to agree that Bynum is not close to returning, but I don't think he will require surgery.
As of today (tues Apr 22) Bynum is reporting "less pain" after workouts, and there seems to be the possibility that he might eventually return to the team during the playoffs. I think its possible, though not probable, that he could play in a WCF.
I don't think the Lakers could get by the Suns without Bynum. But it sure would be a great series. I do think the Lakers can beat the Spurs in a WCF series without Bynum. I do not think the Lakers can beat the Celtics without Bynum, and probably not with him either.
Posted by: ValisJason at Apr 22, 2008 5:07:19 PM
1. Phoenix are now in a worse position against San Antonio than they were last, without Shaq.
2. Shaq is a 12 minute player: good in the first quarter and progressively worse as he gets tired. He can be effectively guarded by Kurt Thomas without help in the fourth quarter.
3. Marion could do something about Parker and Ginobilli, but Shaq's help-defense is nonexistent.
4. Phoenix gets to pay him $40 million over the next two years, as shaq gets more decrepit.
Which of the foregoing is a "very clearly a good idea"? You should offer "all us doubters" up mea culpas.
Posted by: guy in the veal calf office at Apr 23, 2008 12:40:39 AM
