So, Timo, you have little idea what game theory is or its applications, but because it refutes your argument you come with empty rhetoric such as 'Just look out of the window, man' in a, frankly, childish attempt to be contrary - you don't actually think your rhetoric has any credibility, yes?
To the contrary, it appears you have no understanding of game theory.
Suffice to present one infamous example of the grand theory at work. Say, you can have a hundred bucks right now. The catch is, you have to share it with user
Edit ABC; you decide the split. If
Edit ABC turns down your offer, neither of you gets the money.
Game theory to the rescue: you offer him a 99/1 split, with 99 bucks for ya. That's the optimal and logical split, as he would be left with nothing if he turned it down. In fact, you'd offer him just one cent, but unfortunately the rules dictate one-dollar increments for simplicity. You are mightily surprised that he turns you down.
But hey, you are told the offer is good for a hundred times. You can try again 99 times. Browsing through the equations, you again offer a 99/1 split. Again it is turned down, to your amazement, even though he could accumulate 99 bucks by accepting all your offers - against your approximate ten grand.
No worries, an outside expert comes to aid and tells you to change paradigms, something the game theory doesn't cater for by itself. You are told to treat the remaining 98 tries as a bidding contest. As per the equations, you raise by an increment of one dollar (since you can't raise by one cent). To your continuing amazement, not only does
Edit ABC refuse the offer, he actually walks away, muttering "I have better things to do".
Now, a human uncorrupted by game theory might offer a 70/30 at first, and win. But he would still probably offer 50/50, knowing
against all theory that this bid will be accepted with 100% certainty. Or, if he were told from the start that there are 100 tries, he would definitely offer 50/50 at first, knowing that he needs to hook the opponent in order to secure future profits. Hey, even after your disastrous start with the 99/1 bid, a human unhindered by the silly theory could take over and offer 60/40, knowing that this goodwill gesture would result in haggling that would allow at least the remaining ninety or so bids to go profitably.
At the end of the day, then, you would walk away with the game theory manual, but an actual human being would walk away with 5,000 bucks at the very least - and could phone home to the missus after the first two bids already, promising her a new fur coat, because he has predictive powers far in excess of those offered by the game theory.
It's all about taking into account the future. Which is why game theory works splendidly in describing natural evolution, as evolution never takes into account the future. Too bad that game theory can't predict even natural evolution; it's in practice a descriptive tool only - which of course is good for a sales pitch by a consultant, as he can point out that the past twenty years of economy, strategy, terrier breeding or whatever feature plenty of perfect matches to the game theory equations. It's just that the theory cannot predict which of the economy decisions of the
future will be matches, and which will go against the equations.
For the obligatory on-topic bit, there's thankfully no evidence that the Jack Pack relied on anything as absurd as the game theory in predicting UFP downfall.
Timo Saloniemi
