Rational -- by definition and ideology

I've been doing some background reading on rationality in economics, and came across this fairly unique perspective offered by economist Duncan Foley. It's from 2003. What sets it apart from most other reviews of the role of the rationality assumption in economics, is that Foley tries to trace the history of this approach as it emerged out of the tradition of Hobbes and Locke in political philosophy. As Foley notes, the idea of rationality is in many ways beyond question for most economists, and not at all an empirical matter:

...an orientation toward situating explanations of economic phenomena in relation to rationality has increasingly become the touchstone by which mainstream economists identify themselves and recognize each other. This is not so much a question of adherence to any particular conception of rationality, but of taking rationality of individual behavior as the unquestioned starting point of economic analysis.

 It has become so, he asserts, because this way of thinking has emerged from the "just so" story developed by Hobbes, Locke and others which allegedly explains how property rights and political institutions solve problems arising from the anarchic struggle of man against man in the original state of nature. They place reason at the core of this project, and essentially use this story to explain why things are as they are -- this is the rational world and the only way things can be, if we are to avoid the chaos of anarchy. In essence, the rationality assumption is part of a propaganda campaign. Foley:

A hallmark of these [rationally designed] institutions is that they are in themselves in principle democratic and egalitarian (everyone has an equal right to vote or to hold property) but lead
inexorably to sharp inequalities in economic well-being. It is not hard to see that an economic science whose philosophical starting point was not rational individual action would create an embarrassing discord with this political tradition. The whole point of the Hobbes-Locke “discourse” (to use the jargon of post-modernism) is to rationalize the existing inequalities of power and economic well-being that arise from the institutions of modern society as being unavoidable consequences of the interaction of naturally constituted rational individuals
confronting each other as equals, given the natural and unalterable conditions of human existence. Economic science has a place in this grand project only insofar as it can relate itself to the same philosophical foundations.

I think there's a strong current of truth here. There is in today's economic theory a standing presumption that people should be modelled as rational decision makers (optimizers), and the argument often seems to boil down (in some disguised form) to "we must, because if we do not, we will not be able to prove theorems about equilibrium and its efficiency." This is of course too strong, and research programs in behavioural economics, information asymmetries and so on seem to be working to correct this, but the effort required reflects how much resistance there is to such change and how much intellectual inertia still resides in the idea of thorough-going rationality. Foley suggests that efforts to bring more realistic perspectives such as bounded rationality into core theory have been resisted precisely because they cannot be used to justify the just-so story of the efficient equilibrium:

...in its pragmatic focus on understanding and explaining how people actually behave in modern society, bounded rationality loses contact with the underlying project of rationalizing the institutions of modern society. For example, there really is no logical place in the discourse of bounded rationality for the Fundamental Theorems of Welfare Economics that purport to establish a connection between competitive market equilibrium and an efficient allocation of resources.

 I think he may largely be right. If so, this would go a long way to explaining why economics has persisted with such a narrow set of theoretical concepts for such a long time. Maybe it's not actually trying to explain and understand the world at all, but to rationalize why it is OK that it is as we see it. And that's not encouraging for those of us hoping it will change in a big way:

It will not be easy to create a social science that transcends the antinomies and limitations of rational-actor theory. Certainly we cannot depend on the “usual” processes of scientific self-criticism to accomplish much in this direction. No accumulation of its empirical anomalies, or demonstration of its logical inadequacies will somehow magically dispel the power of rational-actor theory, because its power does not rest in the last instance on the adequacy of its
explanations or the consistency of its logic.

Interview with Dave Cliff

Dave Cliff of the University of Bristol is someone whose work I've been meaning to look at much more closely for a long time. Essentially he's an artificial intelligence expert, but has has devoted some of his work to developing trading algorithms. He suggests that many of these algorithms, even one working on extremely simple rules, consistently outperform human beings, which rather undermines the common economic view that people are highly sophisticated rational agents.

I just noticed tht Moneyscience is beginning a several part interview with Cliff, the first part having just appeared. I'm looking forward to the rest. Some highlights from Part I, beginning with Cliff's early work, mid 1990s, on writing algorithms for trading:

I wrote this piece of software called ZIP, Zero Intelligence Plus. The intention was for it to be as minimal as possible, so it is a ridiculously simple algorithm, almost embarrassingly so. It’s essentially some nested if-then rules, the kind of thing that you might type into an Excel spreadsheet macro. And this set of decisions determines whether the trader should increase or decrease a margin. For each unit it trades, has some notion of the price below which it shouldn’t sell or above which it shouldn’t buy and that is its limit price. However, the price that it actually quotes into the market as a bid or an offer is different from the limit price because obviously, if you’ve been told you can buy something and spend no more than ten quid, you want to start low and you might be bidding just one or two pounds. Then gradually, you’ll approach towards the ten quid point in order to get the deal, so with each quote you’re reducing the margin on the trade.  The key innovation I introduced in my ZIP algorithm was that it learned from its experience. So if it made a mistake, it would recognize that mistake and be better the next time it was in the same situation.

HFTR: When was this exactly?

DC: I did the research in 1996 and HP published the results, and the ZIP program code, in 1997. I then went on to do some other things, like DJ-ing and producing algorithmic dance music (but that’s another story!)

Fast-forward to 2001, when I started to get a bunch of calls because a team at IBM’s Research Labs in the US had just completed the first ever systematic experimental tests of human traders competing against automated, adaptive trading systems. Although IBM had developed their own algorithm called MGD, (Modified Gjerstad Dickhaut), it did the same kind of thing as my ZIP algorithm, using different methods. They had tested out both their MGD and my ZIP against human traders under rigorous experimental conditions and found that both algorithms consistently beat humans, regardless of whether the humans or robots were buyers or sellers. The robots always out-performed the humans.

IBM published their findings at the 2001 IJCAI conference (the International Joint Conference on AI) and although IBM are a pretty conservative company, in the opening paragraphs of this paper they said that this was a result that could have financial implications measured in billions of dollars. I think that implicitly what they were saying was there will always be financial markets and there will always be the institutions (i.e. hedge funds, pension management funds, banks, etc). But the traders that do the business on behalf of those institutions would cease to be human at some point in the future and start to be machines. 

Personally, I think there are two important things here. One is that, yes, trading will probably soon become almost all algorithmic. This may tend to make you think the markets will become more mechanical, their collective behaviour emerging out of the very simple actions of so many crude programs.

But the second thing is what this tells us about people -- that traders and investors and people in general aren't so clever or rational, and most of them have probably been following fairly simple rules all along, rules that machines can easily beat. So there's really no reason to think the markets should become more mechanical as they become more algorithmic. They've probably been quite mechanical all along, and algorithmic too -- it's just that non-rational zero intelligence automatons running the algorithms were called people. 

Are economists good scientists?

I've had no time to post recently for several reasons, mostly the urgent need to work on a book closely related to this blog. The deadline is getting closer. I hope to resume something like my previous posting frequency soon.

But I would like to point everyone to a fascinating recent analysis of economists' opinions about the scientific method (that seems the best term for it, at least). Ole Rogeberg, a reader of this blog, alerted me to some work by himself and Hans Melberg in which they surveyed economists to see how much they looked to actual empirical tests of a theory's predictions in judging the value of a theory. The answer, it turns out, is -- not much. Internal consistency seems to be more important than empirical test.

This even for a theory -- the theory of "rational addiction", which seeks to explain heroin addiction and other life destroying addictions as the consequence of fully rational choices on the part of individuals as they maximize their expected utility over their lifetimes -- which on the face of it seems highly unlikely, making the burden of empirical evidence (one would think) even higher. Some history. Gary Becker (Nobel Prize) of the University of Chicago is famous for his efforts to push the neo-classical framework into every last corner of human life. He (and many followers) have applied the trusted old recipe of utility maximization to understand (they claim) everything from crime to patterns of having children to addiction. You may see a slobbering shivering drunk or junkie in an alleyway in winter and think -- like most people -- there goes someone trapped in some very destructive behavioural feedback controlled by the interaction of addictive physical substances, emotions and so on. Not Becker. It's all quite rational, he argues.

Now, Rogeberg and Melberg. Here's their abstract:

This paper reports on results from a survey of views on the theory of rational addiction among academics who have contributed to this research. The topic is important because if the literature is viewed by its participants as an intellectual game, then policy makers should be aware of this so as not to derive actual policy from misleading models. A majority of the respondents believe the literature is a success story that demonstrates the power of economic reasoning. At the same time, they also believe the empirical evidence to be weak, and they disagree both on the type of evidence that would validate the theory and the policy implications. These results shed light on how many economists think about model building, evidence requirements and the policy relevance of their work.

Now, in any area of science there are disgreements over what evidence really counts as important. I've certainly learned this from following 20 years of research on high temperature superconductivity, where every new paper with "knock down" evidence for some claim tends to be immediately countered by someone else claiming this evidence actually shows something quite different. The materials are complex as is the physics, and so far it just doesn't seem possible to bring clarity to the subject.

But in high-Tc research, theorists are under no illusion that they understand. They readily admit that they have no good theory. The same attitude doesn't seem to have been common in economics. Rogeberg and Melberg have also described their survey work in this clearly written paper in a less technical style.

A few more choice excerpts from their (full) paper below:

The core of the causal insight claims from rational addiction research is that people behave in a certain way (i.e. exhibit addictive behavior) because they face and solve a specific type of choice problem. Yet rational addiction researchers show no interest in empirically examining the actual choice problem – the preferences, beliefs, and choice processes – of the people whose behavior they claim to be explaining. Becker has even suggested that the rational choice process occurs at some subconscious level that the acting subject is unaware of, making human introspection irrelevant and leaving us no known way to gather relevant data...

The claim of causal insight, then, involves the claim that a choice problem people neither face nor would be able to solve prescribes an optimal consumption plan no one is aware of having. The gradual implementation of this unknown plan is then claimed to be the actual explanation for why people over time smoke more than they should according to the plans they actually thought they had. To quote Bertrand Russell out of context, this ‘is one of those views which are so absurd that only very learned men could possibly adopt them’ (Russell 1995, p. 110).

On the nature of reasoning in rational addiction models (this is Nobel Prize winning stuff, by the way):

[The addict]... looks strange because he sits down at (the first) period, surveys future income, production technologies, investment/addiction functions and consumption preferences over his lifetime to period T, maximizes the discounted value of his expected utility and decides to be an alcoholic. That’s the way he will get the greatest satisfaction out of life. (Winston 1980, p. 302)

 

Crazy economic models

**UPDATED AT END OF POST**

In a recent post I commented on the "fetish of rationality" present in a great deal of mathematical economic theory. Agents in the theories are often assumed to have super-human reasoning abilities and to determine their behaviour and expectations solely through completely rational calculation. In comments, Relja suggested that maybe I'd gone too far and that economists version of rationality isn't all that extreme:

I think critiques like this about rationality in economics miss the point. The rationality assumed in economics is concerned with general trends; generally people pursue pleasure, not pain (according to their own utility functions), they prefer more money to less (an expanded budget constraint leaves them on a higher indifference curve, thus better off), they have consistent preferences (when they're in the mood for chocolate, they're not going to choose vanilla). Correspondingly, firms have the goal of profit maximization - they produce products that somebody will want to buy or they go out of business. Taking the rationality assumption to its "umpteenth" iteration is really quite irrational in itself. A consumer knows that spending 6 years to calculate the mathematically optimal choice of ice-cream is irrational. An economist accordingly knows the same thing. And although assumptions are required for modelling economic scenarios (micro or macro), I seriously doubt that any serious economist would make assumptions that infer such irrationality. :).

I think Relja expressed a well-balanced perspective, has learned some economics in detail, and has taken away from it some conclusions that are, all in all, pretty sound. Indeed, people are goal oriented, don't (usually) prefer pain, and businesses do try to make profits (although whether they try to 'maximize' is an open question). If economists were really just following these reasonable ideas, I would have no problem.

But I also think the problem is worse than Relja may realize. The use of rationality assumptions is more extreme than this, and also decisive in some of the most important areas of economic theory, especially in macroeconomics. A few days ago, John Kay offered this very long and critical essay on the form of modern economic theory. It's worth a read all the way through, but in essence, Kay argues that economics is excessively based on logical deduction of theories from a set of axioms, one of which (usually) is the complete rationality of economic agents:

Rigour and consistency are the two most powerful words in economics today.... They have undeniable virtues, but for economists they have particular interpretations.  Consistency means that any statement about the world must be made in the light of a comprehensive descriptive theory of the world.  Rigour means that the only valid claims are logical deductions from specified assumptions.  Consistency is therefore an invitation to ideology, rigour an invitation to mathematics.  This curious combination of ideology and mathematics is the hallmark of what is often called ‘freshwater economics’ – the name reflecting the proximity of Chicago, and other centres such as Minneapolis and Rochester, to the Great Lakes.

Consistency and rigour are features of a deductive approach, which draws conclusions from a group of axioms – and whose empirical relevance depends entirely on the universal validity of the axioms.

Kay isn't quite as explicit as he might have been, but economist Michael Woodford, in a comment on Kay's argument, goes further in spelling out what Key finds most objectionable -- the so-called rational expectations framework, originally proposed by Robert Lucas, which forms the foundations of today's DGSE (dynamic stochastic equilibrium models). A core assumption of such models is that all individuals in the economy have rational expectations about the future, and that such expectations affect their current behaviour.

Now, if this meant something like Relja's comment suggests it might -- that people are simply forward looking, as we know they are -- this would be fine. But it's not. The form this assumption ultimately takes in these models is to assume that everyone in the economy has fully rational expectations, in that they form their expectations in accordance with the conceivably best and most accurate economic models, even if solving those models might require considerable mathematics and computation (and knowledge of everyones' expectations). As Woodford puts it in his comment,

It has been standard for at least the past three decades to use models in which not only does the model give a complete description of a hypothetical world, and not only is this description one in which outcomes follow from rational behavior on the part of the decision makers in the model, but the decision makers in the model are assumed to understand the world in exactly the way it is represented in the model. More precisely, in making predictions about the consequences of their actions (a necessary component of an accounting for their behavior in terms of rational choice), they are assumed to make exactly the predictions that the model implies are correct (conditional on the information available to them in their personal situation).
                 
This postulate of “rational expectations,” as it is commonly though rather misleadingly known, is the crucial theoretical assumption behind such doctrines as “efficient markets” in asset pricing theory and “Ricardian equivalence” in macroeconomics.  

It is precisely here that modern economics takes the assumption of rationality much too far merely for the sake of mathematical and theoretical rigour. Do economists really believe people form their expectations in this way? It's hard to imagine they could as the live the rest of their lives with people who do not do this. But the important question isn't what they really believe but on what do they base their theories which then get used by governments in policy making? Sadly, these unrealistic assumptions remain in the key models. But these assumptions really have zero plausibility. Woodford again,

[The rational expectations assumption] is often  presented as if it were a simple consequence of an aspiration to internal consistency in one’s model and/or explanation of people’s choices in terms of individual rationality, but in fact it is not a  necessary implication of these methodological commitments. It does not follow from the fact that one believes in the validity of one’s own  model and that one believes that people can be assumed to make rational  choices that they must be assumed to make the choices that would be seen  to be correct by someone who (like the economist) believes in the validity of the predictions of that model. Still less would it follow, if the economist herself accepts the necessity of entertaining the  possibility of a variety of possible models, that the only models that  she should consider are ones -- in each of which everyone in the economy is assumed to understand the correctness of that particular model, -- rather than entertaining beliefs that might (for example) be consistent with  one of the other models in the set that she herself regards as possibly  correct.

This is the sense in which hyper-rationality really does enter into economic theories. It's still pervasive, and still indefensible. It would be infinitely preferable if macro-economists such as Lucas and his followers (one of whom, Thomas Sargent, was perversely and outrageously just awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel).

**UPDATE**

Blogger sometimes doesn't seem to register comments. Email alerted me to a sharp criticism by ivansml of some of the points I made, but the comment isn't, at least for my browser, yet showing up. Just so it doesn't get lost, ivansml said:

Every assumption is false when understood literally, including rational expectations. The important thing is whether people behave as if they had rational expectations - and answer to that will fortunately depend on particular model and data, not on emotional arguments and expressive vocabulary.

By the way, if you reject RE but accept that expectations matter and should be forward-looking, how do you actually propose to model them? One possible alternative is to have agents who estimate laws of motion from past data and continously update their estimates, which is something that macroeconomists have actually investigated before. And guess what - this process will often converge to rational expectations equilibrium.

Finally, the comment about Nobel Prize (yeah, it's not real Nobel, whatever) for Sargent is a sign of ignorance. Sargent has published a lot on generalizations or relaxations of RE, including the learning literature mentioned above, literature on robustness (where agents distrust their model and choose actions which are robust to model misspecifications) and even agent-based models. In addition to that, the prize citation focuses on his empirical contributions (i.e. testing theories against data). This does not seem like someone who is religiously devoted to "hyper-rationality" and ideology.

To points in response:

1. Yes, the point is precisely to include expectations but to model their formation in some more behaviourally realistic way, through learning algorithms as suggested. I am aware of such work and think it is very important. Indeed, the latter portion of this post from earlier this year looked precisely at this and considered a recent review of work in this area by Cars Hommes and others. The idea is not to assume that everyone forms their expectations identically, that learning is important, that their may be systematic biases and so on. As ivansml notes, there are circumstances in which the model may settle into a rational expectations equilibrium. But there are also many in which it does not. My hunch -- not backed by any evidence that I can point to readily -- is that the rational expectations equilibrium will be increasingly unlikely as the decisions faced by agents in the model become increasingly complex. Very possibly the system won't settle into any equilibrium at all.

But I think ivansml for pointing this out. It is certainly the case that expectations matter, and these should be brought into theory in some plausible and convincing way. Just to finish on this point, this is a quote from the Hommes review article, suggesting that the RE equilibrium doesn't come up very often:

Learning to forecast experiments are tailor-made to test the expectations hypothesis, with all other model assumptions computerized and under control of the experimenter. Different types of aggregate behavior have been observed in different market settings. To our best knowledge, no homogeneous expectations model [rational or irrational] fits the experimental data across different market settings. Quick convergence to the RE-benchmark only occurs in stable (i.e. stable under naive expectations) cobweb markets with negative expectations feedback, as in Muth's (1961) seminal rational expectations paper. In all other market settings persistent deviations from the RE fundamental benchmark seem to be the rule rather than the exception.

2. On his second point about Thomas Sargent, I plead guilty. ivansml is right -- his work is not as one dimensional as my comments made it seem. Indeed, I had been looking into his work over the past weekend for different reasons and had noticed that his work has been fairly wide ranging, and he does deserve credit for trying to relax RE assumptions. (Although he did seem a little snide in one interview I read, suggesting that mainstream macro-economists were not at all surprised by the recent financial crisis.)

So thanks also ivansml for setting me straight. I've changed the offending text above.

The Fetish of Rationality

I'm currently reading Jonathan Aldred's book The Skeptical Economist. It's a brilliant exploration of how economic theory is run through at every level with hidden value judgments which often go a long way to  determining its character. For example, the theory generally assumes that more choice always has to be better. This follows more or less automatically from the view that people are rational "utility maximizers" (a phrase that should really be banned for ugliness alone). After all, more available choices can only give a "consumer" the ability to meet their desires more effectively, and can never have negative consequences. Add extra choices and the consumer can always simply ignore them.

As Aldred points out, however, this just isn't how people work. One of the problems is that more choice means more thinking and struggling to decide what to do. As a result, adding more options often has the effect of inhibiting people from choosing anything. In one study he cites, doctors were presented with the case history of a man suffering from osteoarthritis and asked if they would A. refer him to a specialist or B. prescribe a new experimental medicine. Other doctors were presented with the same choice, except they could choose between two experimental medicines. Doctors in the second group made twice as many referrals to a specialist, apparently shying away from the psychological burden of having to deal with the extra choice between medicines.

I'm sure everyone can think of similar examples from their own lives in which too much choice becomes annihilating. Several years ago my wife and I were traveling in Nevada and stopped in for an ice cream at a place offering 200+ flavours and a variety of extra toppings, etc. There were an astronomical number of potential combinations. After thinking for ten minutes, and letting lots of people pass by us in the line, I finally just ordered a mint chocolate chip cone -- to end the suffering, as it were. My wife decided it was all too overwhelming and in the end didn't want anything! If there had only been vanilla and chocolate we'd have ordered in 5 seconds and been very happy with the result.

In discussing this problem of choice, Aldred refers to a beautiful paper I read a few years ago by economist John Conlisk entitled Why Bounded Rationality? The paper gives many reasons why economic theory would be greatly improved if it modeled individuals as having finite rather than infinite mental capacities. But one of the things he considers is a paradoxical contradiction at the very heart of the notion of rational behaviour. A rational person facing any problem will work out the optimal way to solve that problem. However, there are costs associated with deliberation and calculation. The optimal solution to the ice cream choice problem isn't to stand in the shop for 6 years while calculating how to maximize expected utility over all the possible choices. Faced with a difficult problem, therefore, a rational person first has to solve another problem -- for how long should I deliberate before it becomes advantageous to just take a guess?

This is a preliminary problem -- call is P1 -- which has to be solved before the real deliberation over the choice can begin. But, Conlisk pointed out, P1 is itself a difficult problem and a rational individual doesn't want to waste lots of resources thinking about that one too long either. Hence, before working on P1, the rational person first has to decide what is the optimal amount of time to spend on solving P1. This is another problem P2, which is also hard. Of course, it never ends. Take rationality to it's logical conclusion and it ends up destroying itself -- it's simply an inconsistent idea.

Anyone who is not an economist might be quite amazed by Conlisk's paper. It's a great read, but it will dawn on the reader that in a sane world it simply wouldn't be necessary. It's arguing for the obvious and is only required because economic theory has made such a fetish of rationality. The assumption of rationality may in some cases have made it possible to prove theorems by turning the consideration of human behaviour into a mathematical problem. But it has tied the hands of economic theorists in a thousand ways.

Overconfidence is adaptive?

A fascinating paper in Nature from last week suggests that overconfidence may actually be an adaptive trait. This is interesting as it strikes at one of the most pervasive assumptions in all of economics -- the idea of human rationality, and the conviction that being rational must always be more adaptive than being irrational. Quite possibly not:

Humans show many psychological biases, but one of the most consistent, powerful and widespread is overconfidence. Most people show a bias towards exaggerated personal qualities and capabilities, an illusion of control over events, and invulnerability to risk (three phenomena collectively known as ‘positive illusions’)^{2, 3, 4, 14}. Overconfidence amounts to an ‘error’ of judgement or decision-making, because it leads to overestimating one’s capabilities and/or underestimating an opponent, the difficulty of a task, or possible risks. It is therefore no surprise that overconfidence has been blamed throughout history for high-profile disasters such as the First World War, the Vietnam war, the war in Iraq, the 2008 financial crisis and the ill-preparedness for environmental phenomena such as Hurricane Katrina and climate change^{9, 12, 13, 15, 16}.

If overconfidence is both a widespread feature of human psychology and causes costly mistakes, we are faced with an evolutionary puzzle as to why humans should have evolved or maintained such an apparently damaging bias. One possible solution is that overconfidence can actually be advantageous on average (even if costly at times), because it boosts ambition, morale, resolve, persistence or the credibility of bluffing. If such features increased net payoffs in competition or conflict over the course of human evolutionary history, then overconfidence may have been favoured by natural selection^{5, 6, 7, 8}.

However, it is unclear whether such a bias can evolve in realistic competition with alternative strategies. The null hypothesis is that biases would die out, because they lead to faulty assessments and suboptimal behaviour. In fact, a large class of economic models depend on the assumption that biases in beliefs do not exist¹⁷. Underlying this assumption is the idea that there must be some evolutionary or learning process that causes individuals with correct beliefs to be rewarded (and thus to spread at the expense of individuals with incorrect beliefs). However, unbiased decisions are not necessarily the best strategy for maximizing benefits over costs, especially under conditions of competition, uncertainty and asymmetric costs of different types of error^{8, 18, 19, 20, 21}. Whereas economists tend to posit the notion of human brains as general-purpose utility maximizing machines that evaluate the costs, benefits and probabilities of different options on a case-by-case basis, natural selection may have favoured the development of simple heuristic biases (such as overconfidence) in a given domain because they were more economical, available or faster.

 The paper studies this question in a simple analytical model of an evolutionary environment in which individuals compete for resources. If the resources are sufficiently valuable, the authors find, overconfidence can indeed be adaptive:

Here we present a model showing that, under plausible conditions for the value of rewards, the cost of conflict, and uncertainty about the capability of competitors, there can be material rewards for holding incorrect beliefs about one’s own capability. These adaptive advantages of overconfidence may explain its emergence and spread in humans, other animals or indeed any interacting entities, whether by a process of trial and error, imitation, learning or selection. The situation we model—a competition for resources—is simple but general, thereby capturing the essence of a broad range of competitive interactions including animal conflict, strategic decision-making, market competition, litigation, finance and war.

Very interesting. But I just had a thought -- perhaps this may also explain why many economists seem to exhibit such irrational exuberance over the value of neo-classical theory itself?