Errol Morris and Marc Hauser discuss Game Theory

In Seed Magazine, legendary documentary filmmaker Errol Morris and psychologist Marc Hauser (himself a legend in some circles) discuss the ultimatum game - the one shot, take it or leave it $20 split game.

Seed Magazine interview with Errol Morris and Marc Hauser

MH: This is a one-shot game. On the rational economics view, I should be giving you the smallest proportion of the pot possible. You should accept anything because something’s better than nothing, right? But it turns out that most people offer about half, so about $5. And for people who offer less, usually in the range of $1 to $3, the recipient rejects. So there’s some notion of fairness, which overrides the selfishness we expect. What would we think of ourselves if we offered so little? How would the recipient perceive that kind of offer? So this all plays into the view that the mind evolved with these regulatory mechanisms that counterbalance complete self-interest?

MH: What’s the intuition?

EM: The intuition? To make a crude generalization: In game theory you make a series of calculations. I need to appear generous or fair to ensure that the people around me will be more generous or fair. And so on and so forth. It assumes that people effectively communicate with each other.

EM: Well, very often it seems to me that in trying to analyze human behavior, people create these simplistic games or models that they feel will teach them something. But in real life, you’re plunged into the middle of a confusing, uncertain nightmare.

Morris seems to have a negative view about game theory put into application - that you can't apply a "simple game" to model a real world situation because of the inherent difficulties of applying something simple to the complex. However, he does make an excellent point about one of the rules of game theory - that both players are "effectively communicating with each other."  I think this is very good observation - if a "game" is being played, there is an assumption that both sides understand what is happening.  I think what Morris is saying is that it is very rarely the case when both sides of a game are playing by the same rules or even have the same objectives, etc.