Bounds of Reason

Herbert Gintis holds faculty positions at the Santa Fe Institute and Central European University. He is the author of Game Theory Evolving (Princeton), coauthor of A Cooperative Species: Human Reciprocity and Its Evolution with Samuel Bowles (Princeton), and the coeditor of numerous books, including Moral Sentiments and Material Interests, Unequal Chances (Princeton), and Foundations of Human Sociality.

"The Bounds of Reason appears as two books in one. One part develops an epistemic theory of the rational actor as an alternative to what is provided by classical game theory, and the other part is a spirited plea to use behavioral game theory as a unifying tool in all behavioral sciences. Both objectives are highly valuable, but combing them both creates friction. Friction creates heat, and Gintis, who thrives gleefully on controversial issues, may be enjoying the prospect of heated discussions."--Karl Sigmund, American Scientist "Gintis' work reflects an amazing breadth of knowledge of the behavioural sciences. He is ever ready to pose unusual questions and to defend unorthodox proposals. The Bounds of Reason is Gintis' most ambitious project to date, one that draws upon all of his extraordinary originality and learning."--Peter Vanderschraaf, Journal of Economics and Philosophy "The book is a combination of an excellent textbook on game theory and an innovation treatise advocating the unification of the behavioural sciences and refounding of game theory on different epistemic foundations... It is clearly an important contribution to the current debate over the rational actor model that the rise of behaviourial economics has provoked."--Oxonomics

• Preface xi 1 Decision Theory and Human Behavior 1 1.1 Beliefs, Preferences, and Constraints 4 1.2 The Rationality of Time Inconsistency 9 1.3 Bayesian Rationality and Subjective Priors 12 1.4 Preferences Are State-Dependent 16 1.5 The Behavioral Revolution 18 2 Game Theory: Basic Concepts 33 2.1 The Extensive Form 33 2.2 The Normal Form 36 2.3 Nash Equilibrium 38 2.4 Correlated Equilibrium 47 3 Game Theory and Human Behavior 48 3.1 Behavioral Game Theory 49 3.2 Character Virtues 76 3.3 The Situational Character of Preferences 78 3.4 The Dark Side of Altruistic Cooperation 79 3.5 Norms of Cooperation: Cross-Cultural Variation 81 4 Rationalizability and Common Knowledge of Rationality 86 4.1 Dominated and Iteratedly Dominated Strategies 87 4.2 Epistemic Games 94 4.3 Rationalizable Strategies 98 4.4 Common Knowledge of Rationality 100 5 Extensive Form Rationalizability 106 5.1 Backward Induction and Dominated Strategies 106 5.2 CKR Fails off the Backward Induction Path 113 5.3 How to Play the Repeated Prisoner's Dilemma 114 5.4 Backward Induction and Extensive Form CKR 116 5.5 On the Inadmissibility of CKR 120 6 The Logical Antinomies of Knowledge 123 6.1 The Pitfalls of Na..ive Epistemic Logic 123 6.2 The Common Knowledge of Logicality Paradox 124 6.3 The Surprise Examination 125 6.4 The Modal Logic of Knowledge 126 6.5 A Truth That Cannot Be Known 128 7 The Mixing Problem: Purification and Conjectures 131 7.1 The Incoherence of Mixed Strategies 131 7.2 Purifying Mixed Strategies 133 7.3 A Reputational Model of Honesty and Corruption 135 7.4 Epistemic Games: Mixed Strategies as Conjectures 138 8 Bayesian Rationality and Social Epistemology 142 8.1 The Sexes: From Battle to Ballet 143 8.2 The Choreographer Trumps Backward Induction 144 8.3 Convention as Correlated Equilibrium 146 8.4 The Social Epistemology of Common Priors 149 8.5 The Social Epistemology of Common Knowledge 151 8.6 Social Norms 153 8.7 Game Theory and the Evolution of Norms 153 9 Common Knowledge and Nash Equilibrium 156 9.1 Nash Equilibrium in Two-Player Games 156 9.2 The Modal Logic of Common Knowledge 159 9.3 The Commonality of Knowledge 162 9.4 The Demise of Methodological Individualism 171 10 The Analytics of Human Sociality 174 10.1 Explaining Cooperation: An Overview 174 10.2 The Folk Theorem 178 10.3 Cooperation with Private Signaling 186 10.4 One Cheer for the Folk Theorem 188 10.5 Altruistic Punishing in the Public Goods Game 190 10.6 The Failure of Models of Self-Regarding Cooperation 193 11 The Unification of the Behavioral Sciences 194 11.1 Gene-Culture Coevolution: The Biological Model 196 11.2 Biological and Cultural Dynamics 202 11.3 The Socio-Psychological Theory of Norms 204 11.4 Socialization and the Internalization of Norms 206 11.5 Varieties of Behavioral Modeling 207 11.6 Society as a Complex Adaptive System 215 11.7 The Behavioral Disciplines Can Be Unified 219 12 Summary 221 12.1 Game Theory 221 12.2 Commonality of Beliefs 221 12.3 The Limits of Rationality 222 12.4 Social Norms as Correlated Equilibria 222 12.5 Reason Is Bounded by Sociality, Not Irrationality 223 13 Table of Symbols 224 References 226 Subject Index 254 Author Index 258