The Rational Foundations of Economic Behaviour: Proceedings of the Iea Conference Held in Turin, Italy PDF
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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 this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WIP 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. 10 9 8 7 6 5 4 3 21 05 04 03 02 01 00 99 98 97 96 Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham, Wiltshire 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.
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