【正文】 ip between her actions and consequent outes. – Preferences: an individual?s evaluation of the outes. – Constraints: define the set of feasible actions ? Institutions constitute part of the constraints (you have to pay for the goods you acquire) and (as we will see) they also influence the evolution of beliefs and preferences. Tragedy of the Fishers: A Prisoners Dilemma Eye Jay 6 hours 8 hours Fish 6 hours 1,1 0, 1+ Fish 8 hours 1+, 0 u, u Coordination typically involves problems of both allocation and distribution as in the PD game. What is the allocation problem here? What is the distribution problem? Pure conflict and pure mon interest games. What are they? C o o p e r a t i v eN o n c o o p e r a t i v eC o m m o n I n t e r e s t C o n f l i c tW a g e b a r g a i n i n gL a n g u a g e e v o l u t i o nL a b o r d i s c i p l i n eR u l e s o f t h e r o a dP r o p e r t y r i g h t s ( m o d e r n )C o n t r a c t u a l e x c h a n g eE v o l u t i o n o f n o r m sR e p a y m e n t o f l o a n sP r o p e r t y r i g h t s ( p r e s t a t e )C r o p s h a r e sTragedy of the Fishers: A Prisoners Dilemma Eye Jay 6 hours 8 hours Fish 6 hours 1,1 0, 1+ Fish 8 hours 1+, 0 u, u Common and conflicting interest The degree of mon interest: ?/ (1 u)/(1+) ..or in this case the gain from cooperation by contrast to mutual defection relative to the gain from defecting on a cooperator Or more generally, the maximum difference between the payoffs possible when both choose the same action divided by the maximum difference when they choose different actions (SW to NE distance pared to SE to NW difference). P i nf e r i or N a s he xi s t sN o P i nf e r i or N a s hN o P opt i m um i s N a s h P r i s on e r s 39。 di l e m m a R oc k, pa pe r , s c i s s or sA P o pt i m u m i s N a s h A s s ur a n c e g a m e I nvi s i bl e h a n dA taxonomy of coordination failures (considering only pure strategies) The mathematical representation of institutions ? As exogenously given games ( principal agent models of wage setting) ? As Nash equilibria of games (driving on the right as a mutual best response) ? As NE that are accessible and stable (has a ?large basin of attraction?) in a plausible dynamic (crop shares of one half as stochastically stable states) ? NB the primary tool for the first is classical game theory (institutions by design) while for the second and third one uses evolutionary game theory (spontaneous order) Game theory and the theory of institutions: advantages and shortings ? Advantages over nonstrategic approaches: – Explicit representation of information and action sets – Subjectsubject (strategic) vs Subject object ? Shortings (on which, more later) – Limitations of the Nash equilibrium (evolutionarily irrelevant equilibria) – Cognitively implausible ?refinements? Desiderata for game theory: many important games are … ? Overlapping: one plays in many games simultaneously ? Recursive: the structure of the game in subsequent periods is an oute of past play ? Constitutive: past play of a game influences the preferences and beliefs (and therefore payoffs and equilibrium strategies) in subsequent play ? Asymmetric: when members of different classes, species, sexes, nations, races, age cohorts, etc interact, strategy sets typically differ (and payoffs). ? Other than the last, game theory has not yet adequately modeled the other desiderata Why are coordination failures mon? Why are Pimprovements not implemented? ? No NE is Pefficient (PD) ? There exists a Pefficient NE that is a Pimprovement over the status quo but it is inaccessible (AG) – It is not risk dominant – Coordinating actions is impossible (?if we knew how to do that, we would not be poor.?) ? The transformation of the game to support an accessible Pefficient NE may require institutional innovations that subject one or more parties to the risk of a utility loss. ? There may be no mutually acceptable process to determine the sharing of the gains to cooperation. (UG: processbased utility) Provisional outline Bowles, 2022: Microeconomics: Behavior, Institutions, and Evolution. Princeton University Press, or the Chinese translation (Renmin University Press) 1. Evolutionary, Institutional and Walrasian economics Bowles, and H. Gintis. 2022. Walrasian Economics in Retrospect. Quarterly Journal of Economics, 115:4, pp. 141139. Or Bowles, 2022, Prologue 2. Economic Man, Social Preferencesi, and Public Economics Bowles, 2022, Chapter 3 and Bowles, 2022. Policies designed for self interested citizens may undermine the moral sentiments: Experimental evidence. Science, In press or Bowles, and SH Hwang. 2022. Mechanism design when preferences depend on incentives. Journal of Public Economics, 3 Modeling Institutional Dynamics: Evolution of Private Property Bowles, Samuel. 2022. Chapter 2, Chapter 11 4 Institutional Innovation and Persistence. Bowles, Samuel. 2022, Chapter 12 or Samuel Bowles and Suresh Naidu, “Institutional Persistence” SFI Working Paper 5 Coevolution of preferences and institutions Bowles, 2022, Chapter 13 and Bowles,. 2022. Group petition, reproductive leveling and the evolution of human altruism. Science, 6 Parochial Altruism and War Bowles, Samuel. 2022. Group petition, reproductive leveling and the evolution of human altruism. Science, 314, pp. 156972