The Artificial Intelligence Frontier of Economic Theory
— December 3, 2019
By Thomas Sargent
Data summary and pattern recognition are big parts of the physical sciences as well. The physicist Richard Feynman once likened the natural world to a game played by the gods: “You don’t know the rules of the game, but you’re allowed to look at the board from time to time, in a little corner, perhaps. And from these observations, you try to figure out what the rules are."
Feynman’s metaphor is a literal description of what many economists do. Like astrophysicists, we typically acquire non-experimental data generated by processes we want to understand. The mathematician John von Neumann defined a game as (1) a list of players; (2) a list of actions available to each player; (3) a list of how pay-offs accruing to each player depend on the actions of all players; and (4) a timing protocol that tells who chooses what when. This elegant definition includes what we mean by a “constitution" or an “economic system": a social understanding about who chooses what when.
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