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    {\bf Review of   GAME THEORY AND THE SOCIAL CONTRACT: VOLUME 1,
PLAYING
FAIR by Ken Binmore     }\\
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                     April 16, 1995 \\
                    \bigskip
                    Eric Rasmusen \\

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 Published:{\it Journal of Economic Literature} (December 1995) 33:
1979-80. \\



\begin{small}
          \noindent
\hspace*{20pt}	  	  Indiana University
School of Business, Rm. 456,
  10th Street  and Fee Lane,
  Bloomington, Indiana, 47405-1701.
  Office: (812) 855-9219.   Fax: 812-855-3354. Internet:
Erasmuse@indiana.edu.\\




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\begin{small}
               \noindent
\hspace*{20pt} 2000: Eric Rasmusen, 	Professor of Business
Economics and
Public Policy and Sanjay Subhedar Faculty Fellow,   Indiana
University,
Kelley School of Business, BU 456,
  1309 E 10th Street,
  Bloomington, Indiana, 47405-1701.
  Office: (812) 855-9219.   Fax: 812-855-3354. Erasmuse@indiana.edu.
Php.indiana.edu/$\sim$erasmuse.

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One of the most common objections  to an economist's      policy
suggestions,
whether in the
classroom or in Washington,  is
``That wouldn't be fair!'' The economist's usual   response is   that
fairness
is very  important,  but it is  the  business of philosophers, not
economists---
after which he continues  giving  advice as if philosophy had
nothing to do
with it.


   Professor Binmore believes that economists  should do have
something tosay to
philosophers
about fairness, and  that game theory, in particular, is
important if we are to understand what lies at the root of being
human.  This is not as far-fetched as it may sound.  Escape from
solipsism is a necessary first step for ethics, and game theory asks
how people make decisions in light of their opinions about how other
people will behave. This goes directly to the question of what we
humans have in common with each other.  From such a  beginning we can
move by small steps to the question, first, of who will buy the next
round of drinks, and, eventually, to whether the rich   should pay
taxes to subsidize the poor.


 This book, the first of two volumes, is devoted to developing the
tools and components of an ethical theory and to clearing away the
debris of past failures.  Economists will be able to learn a good
deal of philosophy, and philosophers will be able to learn a good
deal of   game theory.  In this volume, Professor
Binmore criticizes   existing justifications of Kant's categorical
imperative, Bentham's interpersonal comparison of utility,
and Rawls's principle of maximizing the welfare of the least
well-off. In  the second volume,  he will use tools from game theory
to build them back up.  The categorical imperative cannot be
justified by the argument that ``If everybody behaved that way, where
would we be?'', but reciprocity in repeated games may rescue
something very like it.  Interpersonal comparison of utility is
disdained  in conventional welfare economics, but evolutionary biology
may show  why people should be able to know each others'  levels of
happiness.
Rawls's principle is hard to justify as the outcome of rational
decisions in the original position, but perhaps it can be revived
using the idea of multiple equilibria in games.


How is this all to be done?
  Binmore suggests that we start with a ``game of life,'' in which we
live our lives maximizing   utility by our choice of behavior
towards other people.  Societies are organized around conventions,
and we can think of these as equilibria of the game of life.  Not
love and duty, but reciprocity is the cement of society.  A number of
different conventions are possible equilibria, and some equilibria
are preferable to others.  Once a convention is established, we
all obey it from self interest, as a Nash equilibrium. In deciding
which
equilibria are fair, we should look to an
imaginary ``game of morals,'' identical to the game of life except
that at any point a player  can call for a return behind the veil
of ignorance to reshuffle  everyone's position in society---
knowing, however, that someone else might then  call for
another reshuffling. A fair outcome is a fixed point in the game of
morals, a set of conventions from which no one would appeal.

Formality  and humor  are nicely balanced in {\it Playing Fair}.  The
author
knows that
a witticism is even more necessary when the analysis is deep than
when it is easy.  The style is conversational,  but it conceals much
hard work
on the book' structure, hard work evidenced by the use of  special
symbols to
indicate the difficulty of each section  and  directions on which
sections can
be skipped. Not only does Binmore  recognize  that  reading time is
limited
(being an economist), he even  provides efficient redundancy forthose
readers who   skip sections.  Other authors,    take note.

    One possible  feature of an ideal society will  not be found in
this book:
moral education (for the old-fashioned) or mechanism design (for the
trendy).
In
  {\it The  Republic}, Plato moves from trying to explain why Glaucon
should behave virtuously to how society could be redesigned to make
future Glaucons behave virtuously.  Binmore does not want to make
this transition from  analyzing equilibria of the existing game to
changing the
rules of the game.  One of game theory's most profound lessons,
however,  is
that a player can benefit from new rules which reduce his payoffs
on out-of-equilibrium paths--- the pangs of conscience, for example.
Professor Binmore acknowledges that people in the original position
might choose a society in which   education alters their
preferences, but he  rejects this option.  Incorporating it into his
framework
is crucial, I think,  unless economic education improves enough that
we can produce an entire society of citizens who can understand {\it
Playing Fair} instead of having to take  it  on faith.

  REVIEWER: Eric Rasmusen, Indiana University School of Business



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