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Delong Smackdown Watch: Cosma Shalizi Wages the War of All Against All Against Me

Time for me to go read Hobbes's De Cive, certainly:

Brad DeLong Makes a Wishful Mistake: Chris Bertram... wonders about the implications of the fact that "work in empirical psychology and evolutionary anthropolgy (and related fields) doesn't — quelle surprise! — support anything like the Hobbesian picture of human nature that lurks at the foundations of microeconomics.... Brad DeLong asserts that the microfoundations of economics point not to a Hobbesian vision of the war of all against all, but rather to Adam Smith's propensities for peaceful cooperation, especially through exchange:

The foundation of microeconomics is not the Hobbesian 'this is good for me' but rather the Smithian 'this trade is good for us,' and on the uses and abuses of markets built on top of the 'this trade is good for us' principle.

Bertram objects that this isn't true, and others in DeLong's comments section further object that modern economics simply does not rest on this Smithian vision. DeLong replies:

Seems to me the normal education of an economist includes an awful lot about ultimatum games and rule of law these days...

I have to call this one against DeLong.... The fact is that the foundations of standard microeconomic models envisage people as hedonistic sociopaths, and theorists prevent mayhem from breaking out in their models by the simple expedient of ignoring the possibility.

If you open up any good book on welfare economics or general equilibrium... you will see a clear specification of what the economic agents care about: this is entirely a function of their own consumption of goods and services.... If one such agent has an unsatiated demand for potato chips, and the cost of one more chip will be to devastate innumerable millions, they simply are not equipped to care. (And the principle of Pareto optimality shrugs, saying "who are we to judge?") Arrow, Debreu and co. rule out by hypothesis any interaction between agents other than impersonal market exchange, but the specification of the agents shows that they'd have no objection to pillage, or any preference for obtaining their consumption basket by peaceful truck, barter and commerce rather than fire, sword and fear.

Well, you might say, welfare economics and general equilibrium concern themselves with what happens once peaceful market systems have been established. Of course they don't need to put a "pillaging, not really my thing" term in the utility functions, since it would never come up. Surely things are better in game theory, which has long been seen to be the real microfoundations for economics?

In a word, no. If you ask why a von Neumann-Morgenstern agent refrains from pillaging, you get the answers that (1) the game is postulated not to have pillaging as an option, or (2) he is restrained by fear of some power stronger than himself, whether that power be an individual or an assembly.... This is very much in line with the thought of an eminent British moral philosopher — one can read the Folk Theorem as saying that Leviathan could be a distributed system — but that philosopher is not Dr. Smith.

One can defend the utility of the Hobbesian, game-theoretic vision, and though in my humble (and long-standing) opinion the empirical results on things like the ultimatum game mean that it can be no more than an approximation useful in certain circumstances.... But of course those ideas are not part of the generally-accepted microfoundations of economics. This is why every graduate student in economics reads (something equivalent to) Varian's Microeconomic Analysis, but not Bowles's Microeconomics: Behavior, Institutions, and Evolution; would that they did. If you read Bowles, you will in fact learn a great deal about the ultimatum game, the rule of law, and so forth; in a standard microeconomics text you will not. I think the Hobbesian vision is wrong, but anyone who thinks that modern economics's micro-foundations aren't thoroughly Hobbesian is engaged in wishful thinking.