DOCSLIB.ORG

Koopmans in the Soviet Union

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Koopmans in the Soviet Union Koopmans in the Soviet Union A travel report of the summer of 1965 Till Düppe1 December 2013 Abstract: Travelling is one of the oldest forms of knowledge production combining both discovery and contemplation. Tjalling C. Koopmans, research director of the Cowles Foundation of Research in Economics, the leading U.S. center for mathematical economics, was the first U.S. economist after World War II who, in the summer of 1965, travelled to the Soviet Union for an official visit of the Central Economics and Mathematics Institute of the Soviet Academy of Sciences. Koopmans left with the hope to learn from the experiences of Soviet economists in applying linear programming to economic planning. Would his own theories, as discovered independently by Leonid V. Kantorovich, help increasing allocative efficiency in a socialist economy? Koopmans even might have envisioned a research community across the iron curtain. Yet he came home with the discovery that learning about Soviet mathematical economists might be more interesting than learning from them. On top of that, he found the Soviet scene trapped in the same deplorable situation he knew all too well from home: that mathematicians are the better economists. Key-Words: mathematical economics, linear programming, Soviet economic planning, Cold War, Central Economics and Mathematics Institute, Tjalling C. Koopmans, Leonid V. Kantorovich. Word-Count: 11.000 1 Assistant Professor, Department of economics, Université du Québec à Montréal, Pavillon des Sciences de la gestion, 315, Rue Sainte-Catherine Est, Montréal (Québec), H2X 3X2, Canada, e-mail: [email protected]. A former version has been presented at the conference “Social and human sciences on both sides of the ‘iron curtain’”, October 17-19, 2013, in Moscow. I thank Ivan Bolyrev, Olessia Kirtchik, and Wade Hands for comments received at this meeting. I also profited from helpful comments by Roger Backhouse, Johanna Bockman, and Martin Weitzman. Koopmans in the Soviet Union A travel report of the summer of 1965 “Marco Polo imagined answering that the more one was lost in unfamiliar quarters of distant cities, the more one understood the other cities he had crossed to arrive there and he retraced the stages of his journeys, and he came to know the port from which he had set sail, and the familiar places of his youth, and the surroundings of home, and a little square of Venice where he gamboled as a child.” (Calvino, Invisible Cities) Travelling is one of the earliest forms of knowledge production that exists in almost all cultures: Those who know are those went away, found out, and came back with something to tell. Travelling combines two aspects of knowledge: discovery, that is the encounter with the foreign and the novel, which is the kind of experience that we associate with modern knowledge. But it is also contemplation and self-reflection, that is, the encounter with oneself and the familiar, which is a rather low-ranked experience in the modern industry of knowledge. These two aspects describe also Tjalling C. Koopmans’s voyage, jointly with his wife Truus Koopmans, to the Soviet Union in the summer of 1965. Koopmans was the research director of what was the hotbed of mathematical economics in the U.S., the Cowles Foundation of Research in Economics hosted at Yale University. Cowles stands for a profound transformation of the intellectual culture of economics during the decades following World War II away from a policy 1 oriented discipline towards a modeling science (Düppe and Weintraub 2014a). His trip led him to the Central Economic-Mathematical Institute (CEMI, also TSEMI) of the Academy of Science of the USSR, founded two years before in 1963. CEMI would become the hotbed of research in mathematical economics in the USSR that launched a profound transformation of the orthodox- Marxist oriented discipline of political economy to what become labeled “economic cybernetics”. Like an ambassador of these two transformations, Koopmans travel carried the hope of a merging intellectual culture in East and West beyond the ideologies surrounding economic science here and there. The trip was part of the Inter-Academic Exchange Program between the two Academies of Science that was run under the auspices of the American Council of Learned Societies (Byrnes 1969). The program existed since 1958 and was a result of the post-Stalinist liberalization of science. Yet it was still the Soviet Academy that informed the U.S. Academy about the fields of research for which they wished and allowed an exchange. Until 1965, they did not call for an economist to come over. Koopmans indeed was the first official U.S. economist visiting the post- War Soviet Union.2 In what follows, I reconstruct Koopmans’s travel on the base of his official report to the American Council of Learned Societies as well as his correspondence with Soviet and U.S. scholars relevant to this trip.3 As there is little recent historical work about the post-Stalinist rise of mathematical economics in the Soviet Union, this account introduces the reader, through 2 Some other economists have visited the Soviet Union before such as Abram Bergson who travelled already during the Stalinist around 1940 and also Raymond Powell in 1957. But these were not official Academy of Science exchange visits. 3 “Report of the visit to the USSR, May 9 as exchange scholar in economics under the auspices of the American Council of Learned Societies”, Tjalling Charles Koopmans Papers (TKP), Carton 22, “Trip to the Soviet Union, Information Sheets, 1963-1969” (cited in the following as Report). 2 Koopmans’s eyes, to the main actors and institutions of this emerging community.4 Whom did he meet? What did they talk about? And, relevant not only for the historical records of priority and influence, what difference did his visit make to the development of mathematical economics in both East and West? Adapting Koopmans’s first person perspective might come at the cost of a selective portrayal of the Soviet scene, but allows asking a more pricy question: With what hopes and expectations did Koopmans leave, what surprises did he encounter, what questions remained open, and, having gone through these experiences, what did he learn about himself and the U.S. community of mathematical economists? Thus, reconstructing Koopmans’s trip to the Soviet Union adds a piece to the puzzle in the history of scientific experience in 20th century economic science. Out of New Haven The fact that Koopmans was the first economist invited to the Soviet Union is little surprising. The Soviet sensitivities regarding the profession of economists were without doubt greater than regarding other sciences that were practiced on more equal terms on both sites of the iron curtain. Koopmans, as a child of the socialist calculation debate, believed strongly in the idea of equal terms of capitalism and socialism. His entire scientific ethos drew from this attitude that economic science should be practiced prior to the specification of institutional terms, and only as such can contribute to the scientific design of economic institutions in whatever system. 4 For other more recent accounts see Sutela 1991, 2008, Gerovitch 2002, Bockman and Bernstein 2008, Bockman 2011, Bockman 2011, Boldyrev and Kirtchik 2012. The older literature of the 1970s (e.g. Zauberman 1975, Ellman 1973, Kassel 1971, and also Katsenelinboigen 1980, 1986) often lacks the historical distance to see the intellectual change in context. 3 “From my explorations of Marxist thinking in my student years, I have retained a lifelong interest in the prior formulation of that fundamental part of economic theory that does not require specifying the institutional form of society to be used as a framework for the description and comparison of different economic systems.” (Koopmans 1974 [1992]: 235) This basic belief in the pre-institutional content (not only form) of economic theory was at stake when traveling to the Soviet Union. To some extent, this belief was shared among his U.S. colleagues. Being a mathematical economist during the early Cold War was not a self-evident intellectual practice and impinged by contradictory demands. Many U.S. scientists responded defensively to the ideological pressures on the Cold War academic milieu, exerted by phenomena such as McCarthyism, anti-Semitism, and military secrecy (Düppe 2013). The rhetoric of de- politicized research appealed to many scholars, specifically those who applied methods that stem from the military context that was easily confused with non-democratic uses of science. Also Koopmans, a physicist trained economist, contributed to military war planning as a statistician for the British Merchant Shipping Mission in Washington by analyzing efficiency problems of the transportation of tanks (1939, 1942). It was in this research that he formulated the principles of what he would after the war call the “activity analysis” (Koopmans 1951, Düppe and Weintraub 2014a). But Koopmans basic belief also differed from that of other scholars. When Koopmans spoke of pre-institutional theory, he did not only want to establish formal neutrality as many others, but also an actual equivalence of economic problems across political systems. If economic theory is institutionally neutral, then it should play the same role in a free market economy and a socialist economy. Koopmans was thus the ideal candidate for approaching Soviet economists on eye- level. Eastern and Western economists, more than merely sharing universal but inconsequential 4 reason, could learn something from one another. Koopmans operated simultaneously in what for others were two separate spheres: universal reason and institutional design. He left New Haven with the hope of creating a trans-political community of mathematical economists that each in their own country could help one another optimizing their system. Koopmans had good reasons for his hope. In the early 1960s, the same basic belief in pre- institutional, scientific foundations of economic policies became fashionable also in the Soviet Union.
Load more

Recommended publications
  • The Artificial Cold War Content of Game Theory and Operations Research Richard Vahrenkamp [University of Kassel, Germany]
    real-world economics review, issue no. 88 subscribe for free Nominal science without data – the artificial Cold War content of Game Theory and Operations Research Richard Vahrenkamp [University of Kassel, Germany] Copyright: Richard Vahrenkamp 2019 You may post comments on this paper at https://rwer.wordpress.com/comments-on-rwer-issue-no-88/ Abstract Expanding upon literature on early digital computers, this paper shows the role mathematicians have undertaken in founding the academic fields of Game Theory and Operations Research, and details how they were supported by the mathematics departments of military agencies in branches of the US Armed Services. This paper claims that application is only decoration. Other than astronomy, physics and engineering, where experiments generate data analysed with the aid of models and appropriate software on computers, Game Theory and Operations Research are not data driven but method driven and remain a branch of applied mathematics. They use the method of “abstractification” in economy and society to derive their models but lack a layer of empirical research needed to generate data and to apply their methods in economics and society. Therefore, their models were only nominal mathematics without application. Introduction Since 1945, the United States had experienced a unique innovation push with the computer, the nuclear weapon, new air combat weapons and the transistor within just a few years. These innovations were accompanied by Game Theory and Operations Research in the academic field. Widely–held is the view that computers supplemented the mathematical concepts of Game Theory and Operations Research and gave these fields a fresh impulse. Together, they established the view of the world as a space of numbers and introduced quantitative methods in economics, political science and in sociology.
    [Show full text]
  • Strength in Numbers: the Rising of Academic Statistics Departments In
    Agresti · Meng Agresti Eds. Alan Agresti · Xiao-Li Meng Editors Strength in Numbers: The Rising of Academic Statistics DepartmentsStatistics in the U.S. Rising of Academic The in Numbers: Strength Statistics Departments in the U.S. Strength in Numbers: The Rising of Academic Statistics Departments in the U.S. Alan Agresti • Xiao-Li Meng Editors Strength in Numbers: The Rising of Academic Statistics Departments in the U.S. 123 Editors Alan Agresti Xiao-Li Meng Department of Statistics Department of Statistics University of Florida Harvard University Gainesville, FL Cambridge, MA USA USA ISBN 978-1-4614-3648-5 ISBN 978-1-4614-3649-2 (eBook) DOI 10.1007/978-1-4614-3649-2 Springer New York Heidelberg Dordrecht London Library of Congress Control Number: 2012942702 Ó Springer Science+Business Media New York 2013 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. Exempted from this legal reservation are brief excerpts in connection with reviews or scholarly analysis or material supplied specifically for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work. Duplication of this publication or parts thereof is permitted only under the provisions of the Copyright Law of the Publisher’s location, in its current version, and permission for use must always be obtained from Springer.
    [Show full text]
  • Matchings and Games on Networks
    Matchings and games on networks by Linda Farczadi A thesis presented to the University of Waterloo in fulfilment of the thesis requirement for the degree of Doctor of Philosophy in Combinatorics and Optimization Waterloo, Ontario, Canada, 2015 c Linda Farczadi 2015 Author's Declaration I hereby declare that I am the sole author of this thesis. This is a true copy of the thesis, including any required final revisions, as accepted by my examiners. I understand that my thesis may be made electronically available to the public. ii Abstract We investigate computational aspects of popular solution concepts for different models of network games. In chapter 3 we study balanced solutions for network bargaining games with general capacities, where agents can participate in a fixed but arbitrary number of contracts. We fully characterize the existence of balanced solutions and provide the first polynomial time algorithm for their computation. Our methods use a new idea of reducing an instance with general capacities to an instance with unit capacities defined on an auxiliary graph. This chapter is an extended version of the conference paper [32]. In chapter 4 we propose a generalization of the classical stable marriage problem. In our model the preferences on one side of the partition are given in terms of arbitrary bi- nary relations, that need not be transitive nor acyclic. This generalization is practically well-motivated, and as we show, encompasses the well studied hard variant of stable mar- riage where preferences are allowed to have ties and to be incomplete. Our main result shows that deciding the existence of a stable matching in our model is NP-complete.
    [Show full text]
  • John Von Neumann Between Physics and Economics: a Methodological Note
    Review of Economic Analysis 5 (2013) 177–189 1973-3909/2013177 John von Neumann between Physics and Economics: A methodological note LUCA LAMBERTINI∗y University of Bologna A methodological discussion is proposed, aiming at illustrating an analogy between game theory in particular (and mathematical economics in general) and quantum mechanics. This analogy relies on the equivalence of the two fundamental operators employed in the two fields, namely, the expected value in economics and the density matrix in quantum physics. I conjecture that this coincidence can be traced back to the contributions of von Neumann in both disciplines. Keywords: expected value, density matrix, uncertainty, quantum games JEL Classifications: B25, B41, C70 1 Introduction Over the last twenty years, a growing amount of attention has been devoted to the history of game theory. Among other reasons, this interest can largely be justified on the basis of the Nobel prize to John Nash, John Harsanyi and Reinhard Selten in 1994, to Robert Aumann and Thomas Schelling in 2005 and to Leonid Hurwicz, Eric Maskin and Roger Myerson in 2007 (for mechanism design).1 However, the literature dealing with the history of game theory mainly adopts an inner per- spective, i.e., an angle that allows us to reconstruct the developments of this sub-discipline under the general headings of economics. My aim is different, to the extent that I intend to pro- pose an interpretation of the formal relationships between game theory (and economics) and the hard sciences. Strictly speaking, this view is not new, as the idea that von Neumann’s interest in mathematics, logic and quantum mechanics is critical to our understanding of the genesis of ∗I would like to thank Jurek Konieczny (Editor), an anonymous referee, Corrado Benassi, Ennio Cavaz- zuti, George Leitmann, Massimo Marinacci, Stephen Martin, Manuela Mosca and Arsen Palestini for insightful comments and discussion.
    [Show full text]
  • A Beautiful Math : John Nash, Game Theory, and the Modern Quest for a Code of Nature / Tom Siegfried
    A BEAUTIFULA BEAUTIFUL MATH MATH JOHN NASH, GAME THEORY, AND THE MODERN QUEST FOR A CODE OF NATURE TOM SIEGFRIED JOSEPH HENRY PRESS Washington, D.C. Joseph Henry Press • 500 Fifth Street, NW • Washington, DC 20001 The Joseph Henry Press, an imprint of the National Academies Press, was created with the goal of making books on science, technology, and health more widely available to professionals and the public. Joseph Henry was one of the founders of the National Academy of Sciences and a leader in early Ameri- can science. Any opinions, findings, conclusions, or recommendations expressed in this volume are those of the author and do not necessarily reflect the views of the National Academy of Sciences or its affiliated institutions. Library of Congress Cataloging-in-Publication Data Siegfried, Tom, 1950- A beautiful math : John Nash, game theory, and the modern quest for a code of nature / Tom Siegfried. — 1st ed. p. cm. Includes bibliographical references and index. ISBN 0-309-10192-1 (hardback) — ISBN 0-309-65928-0 (pdfs) 1. Game theory. I. Title. QA269.S574 2006 519.3—dc22 2006012394 Copyright 2006 by Tom Siegfried. All rights reserved. Printed in the United States of America. Preface Shortly after 9/11, a Russian scientist named Dmitri Gusev pro- posed an explanation for the origin of the name Al Qaeda. He suggested that the terrorist organization took its name from Isaac Asimov’s famous 1950s science fiction novels known as the Foun- dation Trilogy. After all, he reasoned, the Arabic word “qaeda” means something like “base” or “foundation.” And the first novel in Asimov’s trilogy, Foundation, apparently was titled “al-Qaida” in an Arabic translation.
    [Show full text]
  • Nine Takes on Indeterminacy, with Special Emphasis on the Criminal Law
    University of Pennsylvania Carey Law School Penn Law: Legal Scholarship Repository Faculty Scholarship at Penn Law 2015 Nine Takes on Indeterminacy, with Special Emphasis on the Criminal Law Leo Katz University of Pennsylvania Carey Law School Follow this and additional works at: https://scholarship.law.upenn.edu/faculty_scholarship Part of the Criminal Law Commons, Law and Philosophy Commons, and the Public Law and Legal Theory Commons Repository Citation Katz, Leo, "Nine Takes on Indeterminacy, with Special Emphasis on the Criminal Law" (2015). Faculty Scholarship at Penn Law. 1580. https://scholarship.law.upenn.edu/faculty_scholarship/1580 This Article is brought to you for free and open access by Penn Law: Legal Scholarship Repository. It has been accepted for inclusion in Faculty Scholarship at Penn Law by an authorized administrator of Penn Law: Legal Scholarship Repository. For more information, please contact [email protected]. ARTICLE NINE TAKES ON INDETERMINACY, WITH SPECIAL EMPHASIS ON THE CRIMINAL LAW LEO KATZ† INTRODUCTION ............................................................................ 1945 I. TAKE 1: THE COGNITIVE THERAPY PERSPECTIVE ................ 1951 II. TAKE 2: THE MORAL INSTINCT PERSPECTIVE ..................... 1954 III. TAKE 3: THE CORE–PENUMBRA PERSPECTIVE .................... 1959 IV. TAKE 4: THE SOCIAL CHOICE PERSPECTIVE ....................... 1963 V. TAKE 5: THE ANALOGY PERSPECTIVE ................................. 1965 VI. TAKE 6: THE INCOMMENSURABILITY PERSPECTIVE ............ 1968 VII. TAKE 7: THE IRRATIONALITY-OF-DISAGREEMENT PERSPECTIVE ..................................................................... 1969 VIII. TAKE 8: THE SMALL WORLD/LARGE WORLD PERSPECTIVE 1970 IX. TAKE 9: THE RESIDUALIST PERSPECTIVE ........................... 1972 CONCLUSION ................................................................................ 1973 INTRODUCTION The claim that legal disputes have no determinate answer is an old one. The worry is one that assails every first-year law student at some point.
    [Show full text]
  • Data Envelopment
    Emrouznejad, A., R. Banker, L. Neralić (2019). Advances in Data Envelopment Analysis: Celebrating the 40th anniversary of DEA and the 100th anniversary of Professor Abraham Charnes’ birthday, European Journal of Operational Research, in Press, https://doi.org/10.1016/j.ejor.2019.02.020 Advances in Data Envelopment Analysis Celebrating the 40th anniversary of DEA and the 100th anniversary of Professor Abraham Charnes’ birthday Ali Emrouznejad1*, Rajiv Banker2, Luka Neralić3 1 Aston Business School, Aston University, Birmingham, UK 2 Fox School of Business and Management, Temple University, Philadelphia, PA 19122, United States 3 University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia Abraham Charnes was born in Hopewell, Virginia, USA on September 4, 1917, son of Harry and Rebecca Charnes. He died on December 19, 1992 in Austin, Texas at the age of 75. Dr. Charnes graduated in mathematics from the University of Illinois (Urbana-Champaign) in 1938, where he also received a master's degree in mathematics in 1939. After that he received a graduate scholarship to study at Harvard, but this was interrupted by World War II. In 1942 he entered the U. S. Naval Reserve as an Ensign OV(S) and worked in electromagnetics, torpedo performance and control, supersonic flight, fire control, weapon damage assessment and did the first U. S. pro-submarine operations research. He returned to the University of Illinois where he received a PhD degree in 1947. His dissertation was entitled “Wing-Body Interaction in Linear Supersonic Flow” (adviser D. G. Bourgin). In 1948/49 he began his post-doctoral academic career as an Assistant Professor of Mathematics at Carnegie Institute of Technology.
    [Show full text]
  • The Management of Information & Knowledge; Meeting of the Panel on Science and Technology With
    DOCUMENT RESUME ED 040 730 LI 002 050 TITLE The Management of Information & Knowledge; Meeting of the Panel on Science and Technology with the Committee on Science and Astronautics, U.S. House of Representatives. INSTITUTION Congress of the U.S., Washington, D.C. House Committee on Science and Astronautics. PUB DATE 70 NOTE 243p.; Proceedings of the 11th meeting, 91st Congress, 2nd session, January 27-29, 1970 EDRS PRICE EDRS Price MF-$1.00 HC-$12.25 DESCRIPTORS *Committees, *Communications, *Computers, *Economics, *Information Processing, Information Systems ABSTRACT The emphasis of the eleventh meeting of the Panelon Science and Technology was on the management of information and knowledge. It was organized essentially as a seminar with twopapers given at each session. The topic of the first twopapers presented was: "Computers, Communications, and the Economy." The papers given at the second session were concerned with the kinds of ideals which have been guiding this society and the adequacy of these ideals. The next two papers covered education in a changing world. The problems of privacy and technological obsolescenceswere covered by another speaker. These papers are interspersed by introductory keynote speeches and discussion, sessions. The appendix contains biographies of the panel participants. (NH) PA$EL, ON SCIENCE AND TgqiNotocy, ' IILEyENTLMMING-' , MANAGEMENT OF INFORMATION & KNOWLEDGE ti, OCEEDING-S, . r;BEFOitE IiiMITTEE JON I AND 18TRONAUTIC$ 1101iSE OF jr,REEIES8NTATIVES' NTETY-FIRST CONGRES 1",SecoNp sESSiopi , e 1 JANUARY 27 '28; AND /29,, 1070i; 1 '1 ./3 [No.' .1 Printed for he use of the Committee\,) au Seienee_ aoa A,stronauttea -1, e. 't, L I .
    [Show full text]
  • Handbook of Game Theory, Vol. 3 Edited by Robert Aumann and Sergiu Hart, Elsevier, New York, 2002
    Games and Economic Behavior 46 (2004) 215–218 www.elsevier.com/locate/geb Handbook of Game Theory, Vol. 3 Edited by Robert Aumann and Sergiu Hart, Elsevier, New York, 2002. This is the final volume of three that organize and summarize the game theory literature, a task that becomes more necessary as the field grows. In the 1960s the main actors could have met in a large room, but today there are several national conferences with concurrent sessions, and the triennial World Congress. MathSciNet lists almost 700 pieces per year with game theory as their primary or secondary classification. The problem is not quite that the yearly output is growing—this number is only a bit higher than two decades ago— but simply that it is accumulating. No one can keep up with the whole literature, so we have come to recognize these volumes as immensely valuable. They are on almost everyone’s shelf. The initial four chapters discuss the basics of the Nash equilibrium. Van Damme focuses on the mathematical properties of refinements, and Hillas and Kohlberg work up to the Nash equilibrium from below, discussing its rationale with respect to dominance concepts, rationalizability, and correlated equilibria. Aumann and Heifetz treat the foundations of incomplete information, and Raghavan looks at the properties of two-person games that do not generalize. There is less overlap among the four chapters than one would expect, and it is valuable to get these parties’ views on the basic questions. It strikes me as lively and healthy that after many years the field continues to question and sometimes modify its foundations.
    [Show full text]
  • Chronology of Game Theory
    Chronology of Game Theory http://www.econ.canterbury.ac.nz/personal_pages/paul_walker/g... Home | UC Home | Econ. Department | Chronology of Game Theory | Nobel Prize A Chronology of Game Theory by Paul Walker September 2012 | Ancient | 1700 | 1800 | 1900 | 1950 | 1960 | 1970 | 1980 | 1990 | Nobel Prize | 2nd Nobel Prize | 3rd Nobel Prize | 0-500AD The Babylonian Talmud is the compilation of ancient law and tradition set down during the first five centuries A.D. which serves as the basis of Jewish religious, criminal and civil law. One problem discussed in the Talmud is the so called marriage contract problem: a man has three wives whose marriage contracts specify that in the case of this death they receive 100, 200 and 300 respectively. The Talmud gives apparently contradictory recommendations. Where the man dies leaving an estate of only 100, the Talmud recommends equal division. However, if the estate is worth 300 it recommends proportional division (50,100,150), while for an estate of 200, its recommendation of (50,75,75) is a complete mystery. This particular Mishna has baffled Talmudic scholars for two millennia. In 1985, it was recognised that the Talmud anticipates the modern theory of cooperative games. Each solution corresponds to the nucleolus of an appropriately defined game. 1713 In a letter dated 13 November 1713 Francis Waldegrave provided the first, known, minimax mixed strategy solution to a two-person game. Waldegrave wrote the letter, about a two-person version of the card game le Her, to Pierre-Remond de Montmort who in turn wrote to Nicolas Bernoulli, including in his letter a discussion of the Waldegrave solution.
    [Show full text]
  • Perfect Bidder Collusion Through Bribe and Request*
    Perfect bidder collusion through bribe and request* Jingfeng Lu† Zongwei Lu ‡ Christian Riis§ May 31, 2021 Abstract We study collusion in a second-price auction with two bidders in a dy- namic environment. One bidder can make a take-it-or-leave-it collusion pro- posal, which consists of both an offer and a request of bribes, to the opponent. We show that there always exists a robust equilibrium in which the collusion success probability is one. In the equilibrium, for each type of initiator the expected payoff is generally higher than the counterpart in any robust equi- libria of the single-option model (Eso¨ and Schummer(2004)) and any other separating equilibria in our model. Keywords: second-price auction, collusion, multidimensional signaling, bribe JEL codes: D44, D82 arXiv:1912.03607v2 [econ.TH] 28 May 2021 *We are grateful to the editors in charge and an anonymous reviewer for their insightful comments and suggestions, which greatly improved the quality of our paper. Any remaining errors are our own. †Department of Economics, National University of Singapore. Email: [email protected]. ‡School of Economics, Shandong University. Email: [email protected]. §Department of Economics, BI Norwegian Business School. Email: [email protected]. 1 1 Introduction Under standard assumptions, auctions are a simple yet effective economic insti- tution that allows the owner of a scarce resource to extract economic rents from buyers. Collusion among bidders, on the other hand, can ruin the rents and hence should be one of the main issues that are always kept in the minds of auction de- signers with a revenue-maximizing objective.
    [Show full text]
  • Trust, Trade, and Moral Progress
    Trust, Trade, and Moral Progress Jonathan Anomaly Duke University, UNC – Chapel Hill Duke PPE working paper # 15.0525 Written for Social Philosophy and Policy, 2016 “Wherever the ways of men are gentle, there is commerce, and wherever there is commerce, the ways of men are gentle” ~Baron de Montesquieu Trust is important for a variety of social relationships. With the right background institutions in place, trust facilitates trade, which increases prosperity and induces us to interact with people of different backgrounds on terms that benefit all parties. Trade promotes trustworthiness, which enables us to form respectful as well as mutually beneficial relationships. In what follows, I argue that when we erect institutions that enhance trust and reward people who are worthy of trust, we create the conditions for moral progress.1 1. Introduction Many people have defended market exchange on the grounds that it increases material prosperity. This defense often rings hollow to communitarians who emphasize moral goals that they suspect are better achieved by living together in communities where risk is pooled, income is more evenly divided, and social values can be taught and transmitted to members of the group. Of course, communitarian critics of markets are free to forge their own communities in market society, but they are right that none of us can insulate ourselves from the cumulative cultural effects that markets produce. As Samuel Bowles observes, “Because states, communities, and markets influence the process of cultural evolution, any normative evaluation of the role and scope of these institutions must attempt to take their cultural effects into account.”2 Defenders of markets do themselves no favors, then, by ignoring the social orders that markets help shape, and the legal institutions that shape market exchange.
    [Show full text]