forwarded message from Jud Wolfskill

From: John Conover <>
Subject: forwarded message from Jud Wolfskill
Date: Wed, 7 Oct 1998 14:06:22 -0700

Attached book is interesting. The concept of Nash equilibrium is the
link between entropic economics, game theory, and macroeconomics. The
idea is as follows; most economic "games," (like multi-agent,
iterated, arbitrage-eg., equity prices,) are indeterminate, ie., there
is no solution to the game. However, when the agents play the game,
(with an hypothesis, hunch, whatever,) they will succeed sometimes,
and fail sometimes, in an unpredictable fashion-meaning that such
attempts, over time, will be a fractal, which has stable long term
characteristics, and unpredictable short term characteristics. The
stable long term characteristics is the Nash equilibrium-which is the
equilibrium that macroeconomics is supposed to measure and manipulate.

Both authors, Fudenberg and Levine, are respected in the field, and
have web pages at, and, respectively.


BTW, there is kind of a practicability issue in Nash equilibrium. It
is very common to have unpredictable, (ie., happen for no apparent
reason,) swings away from equilibrium that run in factors of 2 in a
year, (its a fractal, remember-like equity prices, and variations of
2X in a year are average.) So, overreaction and presumptive reaction
is common, (ie., we have to do something about the world financial
crisis, right now!) What happens when you measure a Nash equilibrium
over too short of a time interval? You are misled-that's what. So,
what is an appropriate time interval? For most things in
infrastructural economics, (like equity prices,) it requires a time
interval of 32,000 days, ie., you must measure something each and
every day for a century and a quarter. That's the practicability

(Note that the concept of doing many little adjustments in little
increments along the way will not necessarily converge to the right
thing a century later, either. Number one, you can't measure the
results of the adjustments along the way, so you don't know which way
to adjust things next, and, secondly, such a process is just another
random variable in a system dominated by other random variables. So,
what's the answer? Suggestions and comments should be forwarded to
Alan Greenspan, ASAP.)

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Message-ID: <>
From: Jud Wolfskill <>
Subject: Book:  The Theory of Learning In Games
Date: Tue, 06 Oct 1998 11:44:30 -0400

The following is a book which readers of this list might find of
interest.  For more information please visit

The Theory of Learning in Games
Drew Fudenberg and David K. Levine

In economics, most noncooperative game theory has focused on equilibrium
in games, especially Nash equilibrium and its refinements. The
traditional explanation for when and why equilibrium arises is that it
results from analysis and introspection by the players in a situation
where the rules of the game, the rationality of the players, and the
players' payoff functions are all common knowledge. Both conceptually
and empirically, this theory has many problems.

In The Theory of Learning in Games Drew Fudenberg and David Levine
develop an alternative explanation that equilibrium arises as the
long-run outcome of a process in which less than fully rational players
grope for optimality over time. The models they explore provide a
foundation for equilibrium theory and suggest useful ways for economists
to evaluate and modify traditional equilibrium concepts.

Economics Learning and Social Evolution
January 1998
286 pp.
ISBN 0-262-06194-5
MIT Press * 5 Cambridge Center * Cambridge, MA  02142 * (617)625-8569

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John Conover,,

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