Mindless strategists

In Hobbes’s Leviathan the competition of individuals who can choose on the basis of a model of the situation and in view of the expected causal consequences of each act taken separately takes place under a scarcity constraint.

The assumption that conduct is prompt and rational is in all cases a fiction. But it proves sufficiently near to reality, if things have time to hammer logic into men. Where this has hap­pened, and within the limits it has happened, one may rest content with this fiction and build theories upon it... and we can depend upon it that the peasant sells his calf just as cunningly and egoistically as the stock exchange member his portfolio of shares. But this holds good only where precedents without number have formed conduct through decades and, in fundamentals, through hundreds and thousands of years, and have eliminated unadapted behavior. Outside of these limits our fiction loses its closeness to reality. (Schumpeter 1959: 80)

Armen Alchian (1950), in an argument concerning firms competing on “open markets”, argued in the same vein. Only “well-adapted” firms would survive in a (suitably speci­fied) competitive process. Their behaviour would look like that of a “corporate” homo oeconomicus since, firstly, better than choosing optimally is impossible, secondly, the factual evolutionary process will, under certain conditions, weed out less than optimal behaviour and therefore, thirdly, whenever the conditions are met, selection will generate the behaviour that would have been generated by a fully rational corporate homo oeco- nomicus (see in detail Gintis 2000).

Arguments like those of Schumpeter and Alchian raise, however, a foundational problem stated with exemplary clarity by Robert Aumann:

When there is a formal relationship between two interpretations, like the rationalistic conscious maximization and evolutionary interpretations of Nash equilibrium, then one can say, “Oh, this is an accident, these things really have nothing to do with each other.” Or, one can look for a deeper meaning.

Philosophically we should indeed seek for the deeper meaning envisioned by Aumann. This is a central philosophical question concerning the “make up” of the (economic) world. Yet, even if we could find such a deeper philosophical meaning it would not reinstate the homo oeconomicus model in its explanatory role. For, even then it would not be the model of homo wconomicus that explains phenomena. Quite on the contrary, the fact that behaviour is “as if maximizing” is explained on some ultimate level. We encounter an explanandum (something to be explained) rather than being provided with an explanans (something that explains).