ROBINSON CRUSOE MEETS GILLIGAN

Back in the days when von Neumann and Morgenstern were working all this out, standard economic textbooks extolled a simple economic model of their own, called the “Robinson Crusoe” economy. Stranded on a desert island, Crusoe was an economy unto himself. He made choices about how to use the resources available to him to maximize his utility, coping only with the circumstances established by nature.

Samuel Bowles, an economist at the University of Massachusetts, explained to me that textbooks viewed economics as just the activities of many individual Robinson Crusoes. Where Crusoe interacted with nature, consumers in a big-time economy interacted with prices. And that was the standard “neoclassical” view of economic theory. “That’s what everybody taught,” Bowles said. “But there was something odd about it.” It seemed to be a theory of social interactions based on someone who had interacted only nonsocially, that is, with nature, not with other people. “Game theory adopts a different framework,” Bowles said. “I’m in a situation in which my well-being depends on what somebody else does, and your well-being depends on what I do—therefore we are going to think strategically.”17

And that’s exactly the point that von Neumann and Morgenstern stressed back in 1944. The Robinson Crusoe economy is fundamentally different, conceptually, from a Gilligan’s Island economy. It’s not just the complication of social influences from other people affecting your choices about the prices of goods and services. The results of your choices—and thus your ability to achieve your desired utility—are inevitably intertwined with the choices of the others. “If two or more persons exchange goods with each other, then the result for each one will depend in general not merely upon his own actions but on those of the others as well,” von Neumann and Morgenstern declared.18

Mathematically, that meant that no longer could you simply compute a single simple maximum utility for Robinson Crusoe. Your calculations had to accommodate a mixture of competing



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement