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Paradoxes versus formalism in economics. Evidence from the early years of game theory and experimental economics

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Alessandro Innocenti ()

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Abstract

This paper argues that the acceptance of two recent methodological advances in economics, namely game theory and laboratory experimentation, was affected by the history dependence constraining the formalization of economics. After an early period in which the two methods were coolly received by economists because their applications challenged some basic hypotheses of mainstream economics, their subsequent acceptance was the result of the corroboration of those same hypotheses. However, the recent emergence of some paradoxes has finally revealed that the effectiveness of game theory and experimental techniques in economics is improved when descriptively implausible and normatively unsatisfactory assumptions such as the centrality of individual maximization in decision theory and the definition of rationality as consistency in preferences are revised.

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Paper provided by Department of Economics, University of Siena in its series Department of Economics University of Siena with number 433.

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Date of creation: Jul 2004
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Handle: RePEc:usi:wpaper:433

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Related research
Keywords: paradoxes; game theory; experiments; individual maximization; economic rationality;

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Find related papers by JEL classification:
B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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  3. Stephen W. Rousseas & Albert G. Hart, 1951. "Experimental Verification of a Composite Indifference Map," Journal of Political Economy, University of Chicago Press, vol. 59, pages 288. [Downloadable!] (restricted)
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  8. Schotter, Andrew & Schwodiauer, Gerhard, 1980. "Economics and the Theory of Games: A Survey," Journal of Economic Literature, American Economic Association, vol. 18(2), pages 479-527, June. [Downloadable!] (restricted)
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  13. Robert J. Leonard, 1995. "From Parlor Games to Social Science: Von Neumann, Morgenstern, and the Creation of Game Theory, 1928-1994," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 730-761, June. [Downloadable!] (restricted)
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  14. Rubinstein, Ariel, 2001. "A theorist's view of experiments," European Economic Review, Elsevier, vol. 45(4-6), pages 615-628, May. [Downloadable!] (restricted)
  15. Frederick Mosteller & Philip Nogee, 1951. "An Experimental Measurement of Utility," Journal of Political Economy, University of Chicago Press, vol. 59, pages 371. [Downloadable!] (restricted)
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