The Rational Foundations of Economic Behaviour: Proceedings of the Iea Conference Held in Turin, Italy

406 Pages·1996·8.971 MB·English

by  Kenneth Joseph Arrow, International Economic Association

The Rational Foundations
of Economic Behaviour
Proceedings of the IEA Conference
held in Turin, Italy
Edited by
Kenneth J. Arrow, Enrico Colombatto,
Mark Perlman and Christian Schmidt
THE RATIONAL FOUNDATIONS OF
ECONOMIC BEHAVIOUR
This is IEA conference volume no. 114
This page intentionally left blank
The Rational Foundations
of Economic Behaviour
Proceedings of the IEA Conference
held in Turin, Italy
Edited by
Kenneth J. Arrow
Enrico Colombatto
Mark Perlman
and
Christian Schmidt
in association with the
INTERNATIONAL ECONOMIC
& ASSOCIATION
Mjk First published in Great Britain 1996 by
W MACMILLAN PRESS LTD
Houndmills, Basingstoke, Hampshire RG21 6XS
and London
Companies and representatives throughout the world
UNESCO subvention 1992/93/SHS/SES/68/SUB/16
This book contains the proceedings of a conference
organized by the International Economic Association
in collaboration with the International Centre for
Economic Research, Turin
A catalogue record for this book is available
from the British Library.
ISBN 0-333-62197-2
MJk First published in the United States of America 1996 by
W ST. MARTIN'S PRESS, INC.,
Scholarly and Reference Division,
175 Fifth Avenue,
New York, N.Y. 10010
ISBN 0-312-12708-1
Library of Congress Cataloging-in-Publication Data
The rational foundations of economic behaviour: proceedings of the
IEA conference held in Turin, Italy / edited by Kenneth J. Arrow ...
[et al.J
p. cm.
Includes bibliographical references and index.
ISBNO-312-12708-1
1. Rational expectations (Economic theory)—Congresses.
2. Rational choice theory—Congresses. 3. Economic man—Congresses.
I. Arrow, Kenneth Joseph, 1921 —
HB199.R37 19%
330—dc20 95-7828
OP
© International Economic Association 1996
All rights reserved. No reproduction, copy or transmission of
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Printed and bound in Great Britain by
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Contents
The International Economic Association ix
Acknowledgements x
List of Contributors xi
Abbreviations xii
Preface xiii
Kenneth J. Arrow
Introduction
Enrico Colombatto and Mark Perlman xix
PARTI RATIONAL CHOICE AND LOGICAL PROBLEMS
1 Decision Kinematics
Richard C Jeffrey 3
Comment
Christian Schmidt 20
2 Consequentialism, Structural Rationality and Game Theory
Peter J. Hammond 25
Comment
Bertrand Munier 43
3 Paradoxes of Rationality in Decision-Making Theory
Christian Schmidt 49
Comment
Franco Donzelli 78
Reply
Christian Schmidt 85
4 Rationality and Comprehension
Avishai Margalit and Menahem Yaari 89
Comment
Amartya Sen 101
Reply
Robert J. Aumann 106
PARTH RATIONALITY IN GAME THEORY
5 Rationalizing Backward Induction
Ken Binmore and Larry Samuelson 111
Comment
Bernard Walliser 125
VI Contents
Reply
Robert J. Awnann 130
6 The Decision-Theoretic Foundations of Game Theory
Marco Mariotti 133
Comment
Pierpaolo Battigalli 149
7 Nash Equilibrium and Evolution by Imitation
Jonas Bjornerstedt and Jorgen Weibull 155
Comment
Pier Luigi Sacco 172
PART ffl RATIONAL BEHAVIOUR FROM AN
EXPERIMENTAL APPROACH
8 Rational Theory and Constructive Choice
Amos Tver sky 185
Comment
Alvin E. Roth 198
9 New Challenges to the Rationality Assumption
Daniel Kahneman 203
Comment
Charles R. Plott 220
10 Rational Individual Behaviour in Markets and Social Choice
Processes
Charles R. Plott 225
Comment
Daniel Kahneman 251
11 Adaptive Behaviour and Strategic Rationality: Evidence from the
Laboratory and the Field
Alvin E. Roth 255
Comment
Jean-Louis Rulliere 275
PART IV ALTERNATIVE TREATMENTS OF RATIONALITY IN
DECISION-MAKING SYSTEMS
12 The Rationality of Adaptive Agents
John H Holland 283
Comment
Frank Hahn 300
13 Routines, Hierarchies of Problems, Procedural Behaviour:
Some Evidence from Experiments
Massimo Egidi 303
Contents vii
Comment
Hamid Sabourian 334
14 Rational Preferences and Rational Beliefs
Mordecai Kurz 339
Comment
Kenneth J. Arrow 362
Postface
Christian Schmidt 365
Index of Names 373
Subject Index 311
The International Economic
Association
A non-profit organization with purely scientific aims, the International Economic
Association (IEA) was founded in 1950. It is a federation of some sixty national
economic associations in all parts of the world. Its basic purpose is the development
of economics as an intellectual discipline, recognizing a diversity of problems,
systems and values in the world and taking note of methodological diversities.
The IEA has, since its creation, sought to fulfil that purpose by promoting mutual
understanding among economists through the organization of scientific meetings
and common research programmes, and by means of publications on problems of
fundamental as well as of current importance. Deriving from its long concern to
assure professional contacts between East and West and North and South, the IEA
pays special attention to issues of economies in systemic transition and in the course
of development During its more than forty years of existence, it has organized
eighty round-table conferences for specialists on topics ranging from fundamental
theories to methods and tools of analysis and major problems of the present-day
world. Participation in round tables is at the invitation of a specialist programme
committee, but ten triennial World Congresses have regularly attracted the
participation of individual economists from all over the world.
The Association is governed by a Council, composed of representatives of all
member associations, and by a fifteen-member Executive Committee which is
elected by the Council. The Executive Committee (1992-95) at the time of the Turin
Conference was:
President: Professor Michael Bruno, Israel
Vice-President: Academician Abel G. Aganbegyan, Russia
Treasurer: Professor Erich Streissler, Austria
Past President: Professor Anthony B. Atkinson, UK
Other Members: Professor Karel Dyba, Czech Republic
Professor Jean-Michel Grandmont, France
Professor Yujiro Hayami, Japan
Professor Anne Krueger, USA
Professor Juan-Antonio Morales, Bolivia
Professor Agnar Sandmo, Norway
Professor Amartya Sen, India
Professor Rehman Sobhan, Bangladesh
Professor Alan D. Woodland, Australia
Professor Stefano Zamagni, Italy
Advisers: Professor Kenneth J. Arrow, USA
Academician Oleg T. Bogomolov, Russia
Professor Mohammed Germouni, Morocco
Professor Luigi Pasinetti, Italy
vm
The International Economic Association IX
Secretary-General: Professor Jean-Paul Fitoussi, France
General Editor Professor Michael Kaser, UK
Professor Sir Austin Robinson was an active Adviser on the publication of
conference proceedings from 1954 until his final short illness in 1993.
The Association has also been fortunate in having secured many outstanding
economists to serve as President:
Gottfried Haberler (1950-53), Howard S. Ellis (1953-56), Erik Lindahl (1956-
59), E.A.G. Robinson (1959-62) G. Ugo Papi (1962-65), Paul A. Samuelson
(1965-68), Erik Lundberg (1968-71), Fritz Machlup (1971-74), Edmond
Malinvaud (1974-77), Shigeto Tsuru (1977-80), Victor L. Urquidi (1980-83),
Kenneth J. Arrow (1983-86), Amartya Sen (1986-89), and Anthony B. Atkinson
(1989-92).
The activities of the Association are mainly funded from the subscriptions of
members and grants from a number of organizations, including continuing support
from UNESCO, through the International Social Science Council.