The Analytics of Human Sociality
The whole earth had one language. Men said, “Come, let us build
ourselves a city, and a tower with its top in the heavens.” The
Lord said, “Behold, they are one people, and they have all one
language. Nothing will now be impossible for them. Let us go
down and confuse their language.” The Lord scattered them over
the face of the earth, and they ceased building the city.
An economic transaction is a solved political problem. Economics
has gained the title of Queen of the Social Sciences by choosing
solved political problems as its domain.
It is often said that sociology deals with cooperation and economics deals with competition. Game theory, however, shows that cooperation and competition are neither distinct nor antithetical. Cooperation involves aligning the beliefs and incentives of agents with distinct interests, competition among groups requires cooperation within these groups, and competition among individuals may be mutually beneficial.
A major goal of economic theory is to show the plausibility of wide-scale cooperation among self-regarding individuals. In an earlier period, this endeavor centered on the Walrasian model of general market equilibrium, culminating in the celebrated fundamental theorem of welfare economics (Arrow and Debreu 1954; Debreu 1959; Arrow and Hahn 1971). However, the theorem's key assumption that market exchange can be enforced at zero cost to the exchanging parties is often violated (Arrow 1971; Bowles and Gintis 1993; Gintis 2002; Bowles 2004).
The game theory revolution replaced reliance on exogenous enforcement with repeated game models in which punishment of defectors by cooperators secures cooperation among self-regarding individuals. Indeed, when a game G is repeated an indefinite number of times by the same players, many of the anomalies associated with finitely repeated games (4.11, §5.1,