you're watching economics amplified the latest knocking on the biggest issues from you Chicago's Becker Friedman Institute you hello everybody if we can all get settled you can keep on munching because this is the this is the Freeman forum with lunch welcome this is the Becker Friedman Institute for economic researchers Friedman forum created in order to get our prime researchers in contact with undergraduates because the mission of the Becker Friedman Institute is to support research on campus and what's research without research assistance right okay so we are extremely glad to be hosting Hugo Sun and shine first thing is there will be two more Friedman forums this year one will be Michael green stone talking on the subject of environmental economics and the spring one will be Amy Finkelstein from MIT and we'll see what topic she chooses so you know the phrase ah Hugo sunshine is so well-known he needs no introduction I'm gonna ignore that one that always makes me cringe now for this audience of undergraduates you may have heard that he has been teaching game theory right so you know him as a professor of game theory you've come to the University slightly too late to know him as president of the university let me expand a bit so that you can share with me all the things that it means to me to be introducing Hugo with my career advisory hat on let's let's review Cuba's career slightly he started with the University of Rochester college degree and even then you interacted with Lionel McKenzie famous theoretician he went and got his PhD from Purdue University and from then his professor truck what led him from Minnesota to UMass to Northwestern and to Princeton and there he was he's you can see his CV is filled with research papers on theory a slight diversion he went to UPenn and became Dean of Social Sciences there right for the whole you know the whole Arts and Sciences and then from there Provost at Princeton and then the pinnacle of this is president of course of University of Chicago but I bring up that career because I want you to take a few pointers from looking at what Hugo has done I think the first thing we might draw from this is go work hard and keep going until you find something better to do the second one is from watching his leadership in his presidential role here at the University of Chicago I think one of the things that I learned watching that process was that institutions don't really like to change what Hyuga showed me was that a good leader can actually listen and make the hard choices institutions sometimes don't respond as quickly as we expect economic decision makers to change even in the face of financial imperatives but in the course of creating that change from what University should look like before and let me remind you that we used to have 2/3 graduate students and 1/3 undergraduates that's not what we are now right does everybody know the fractions now even confounding the professional schools or much more a half and half right the undergraduate program as expected is grown largely so the University of Chicago has been shaped very much by Hugo's work and as a president and what I learned in terms of leadership was that you do have to make hard choices I've heard you talk about the transition and the kickback that got in trying to take the university on a new path and he actually shared this with a general audience so I don't feel like I shouldn't share this but somebody came up to him an alumni of the University and said as he started done on this presidential shift of policy don't ruin it they said to Hugo and I think that when we look now what the university is he didn't he not only didn't ruin it but he enabled its growth and continued success so what you see now is this burgeoning top undergraduate program that constitutes half of the faculty the student population is really what Hugo did as president since then he's taught game theory so you may know him as just the guy who teaches game theory one more faculty member but that's all post-presidential so in that role he sent a wonderful number of students on took Theory careers like simon lazarus raj mlady duncan lived over and the list goes on and can include you so sorry I took up so much time but I really felt I needed to say this Lars Hanson would have been here giving this talk except he's wearing his statistics hat today so you know so you get me thank you thank you very much grace so you know since all of these things were said in the introduction which are not really about the talk that I'm gonna give I do want to make a bit of a comment about your University and my University what's really great about the University of Chicago and what's been great through its history is its values and its ability to execute on those values so this is a university that really understands what a great university should be and too few universities in our country and in the history of higher education in this country have understood that well and you you just hear that every day as you walk around campus it's the values it's our belief in thinking and scholarship and in what we do so that's the part that you have to remember I must say I sometimes get a little bit in embarrassed when period of change and an undergraduate growth undergraduate growth came along with Chicago being that much more attractive and there are financial imperatives as well but it's really the values that are important and maintaining those values enhancing them being able to afford them which is not entirely easy is what I care about I'm sure it's what you care about so that that's not what this is is about I have the great luxury of being invited to present this talk which is going to be really quite an informal talk very much not a class I hope you'll just munch along I hope you'll you'll ask questions there are elements of what I'm going to speak about that you know very well and you're a very diverse group you range from from freshmen to seniors and and beyond so to do something which works for all of you is a bit of a challenge but I'm going to be speaking about very basic issues I'm going to be speaking about the history of thought to some extent and I'm going to speak be speaking very much from the heart I'll actually be using I won't get quite as far as long but uh in them but I'll be using some slides that I used in research lectures that I just gave in Japan and were used here in a conference a couple of weeks ago when it was delivered by one of my co-authors so the the research part of this his joint work with Matt Jackson who was once my student at then very distinguished scholar at Stanford his graduate student eking a change Singh who I spent a lot of time with during the last two years and Christa Stumbo says who is a professor at Monash University and Omar Allah who by Clee who's in Bahrain and studied here got his PhD here so there's an element of this which is research there's an element of this which is just an introduction to what I think economics is most basically about and what it's too easy for you to forget that we're about because we just are so eager to put into your your heads difficult analytic material that you really need in order to understand modern-day economics but it's it is very important to start at the beginning and understand how economics developed a little bit of what we know and what we don't know and to focus on these basic questions so you know the basic questions these are quotes that you that you know but you should read and you should pay attention to there's there's Adam Smith's statement about the invisible hand the first statement is actually a weaker statement than the second one that I have there the natural effort of every individual to better his own condition is so powerful that it is alone and without any assistance not only capable of carrying on the society to wealth and prosperity but to surmounting a hundred impertinent obstructions with which the quality of human laws too often encumbers its operation it's a very strong statement and if you look to the modern counterpart and now I'm sort of leaning on what those of you have been around for a little while here have been taught you know the the formal expression of that is the idea of a price guided equilibrium of always in equilibrium and the theorem that fell raising an equilibrium were Pareto efficient at least when you don't have externalities when you don't have monopolistic elements you know and and the conclusion about Pareto efficiency is a very narrow conclusion about an economy doing well as many of you know means you can't make anybody better off in allocation without making somebody else less well-off so it says nothing about the distribution of income and in fact Adam Smith was very concerned about the distribution of income and and he wrote a celebrated treatise the Theory of Moral Sentiments in which he expressed his his caring about the distribution of income in a heart for a society to be a successful society with great inequality no society can truly be flourishing and happy of which the far greater part of the members are poor and miserable so that's a statement about the distribution of income and in fact at the time that Smith was writing the if you wanted to know how people felt about people doing the best for themselves as opposed to being concerned individually with the social good there are images that are are rather wonderful and you can see these in art where there's a table that has you and wonderful amounts of food and everybody could be fed quite nicely at this table everybody at the table it's a round table has a long Fork and they have a problem if they reach in and take some of the food and try and feed themselves the forks are so long that it goes right by their ear but on the other hand if they'll stab in and give it to the person who's opposite them if they share it and do things that way thinking about others everybody will come out fat and happy you know that that's an important historical image and in fact the idea that people being selfish doing the best for themselves will promote the so the social good is this somewhat outrageous idea and and if you look at what leading economists are talking about these days and what a lot of be hey who knows about behavioral economics put your hands up who likes behavioral economics who finds it pretty intriguing who's been taught some of it in class who's suspicious well I really want ya I don't care that you actually answer but I want you to be thinking about this kind of thing I thought it's interesting because there's a book by Fowler of our booth school very celebrated entitled misbehaving which is the which is a history of behavioral economics and before that he wrote a book nudge with Cass Sunstein it was a member of this faculty I'll be leading a panel noth-nothing panel I'll be I'll be a moderator I'll be with him on a stage and in a dialogue with him on Monday and this week I traveled to Canada and I was with George Akerlof and a Koloff and Schiller each individually and for different reasons won the Nobel Prize but they've just authored a book where it's all about behavioral economics and it's all about the idea that you should be mistrustful about the idea that people doing the best for themselves will promote the social good partly because we don't know what's good for us I'm actually pretty good at some elements of behaving like economic and rational man I'm rather good at deferring consumption I was good at saving for my children's education and and for the house that I wanted to live in but if you put a bowl of cashews in front of me I just turned the cottage cheese and and you know this idea that you know well-documented true that that you could have a world where people were told by distinguished scientists that smoking isn't bad for you just just enjoy and you had the most prominent statistician of the day and and really very important scientists backing this idea and we're you know we're subject to all sorts of advertising I so I I have three daughters I'm this is very informal talk one's an investment banker had a career at Goldman Sachs one's a marketing person you know the third is a benefit consultant they were all math majors in college but this idea that there's an element of selling people things which may not be the best for them this is going on right now quite a bit with coca-cola I don't know whether you you follow this I love coca-cola I'm actually pretty good at not drinking tons of coca-cola but there was a time when I had quite a bit of it and I have a bit of a pot which I'm trying to lose right now and the amount of sugar in these strengths and coca-cola in particular is just massive and there's the there's quite a debate going on and there's quite a lot of you know scientists involved in this debate on both sides but there should be no mistaking that coca-cola has it in its interest to make you feel that drinking tons of it is not so bad for you and I'm not going to upon on how bad it is for you but that coca-cola is interested in having you feel that the more coke the merrier and it's very tasty stuff I think is indisputable so you know if you start with the idea that we don't know what's best for ourselves then somehow you should expect that people doing what's best for themselves will not necessarily promote the social good that that's not an unreasonable idea you're at a great University economics has a particular slant on things political science has a different slant sociology a different slant psychology a different slant mathematics and statistics you'll learn tools you know you at the end of the day have to have a healthy skepticism and you have to figure out what is right and important and you should be pushing back you know the more you push back the better and one of the great things about teaching undergraduates especially here and I've taught undergraduates at the best places I must also tell you I spent most of my career teaching graduate students and not undergraduates but with undergraduates you have healthy skepticism you haven't yet bought into all our stories don't buy into all our stories particularly if you want to do the work that later gets recognized big time and you're capable of doing that we at Chicago have seen more than our share of the development of those kinds of young people so be skeptical let me start then in terms of something a little bit more formal with a prisoner's dilemma this is the prisoner's dilemma who doesn't who hasn't heard of the prisoner's dilemma who feels very confident of their understanding hand up I know I said whatever if it was a real class I make it all add up to one I'm going to tell you a way and I'll only use 30 seconds to never forget the prisoner's dilemma and it's a different story than you're used to and I'm gonna do it with the two of you and it works this way I have two envelopes and I'm gonna hand these envelopes to you I'm also going to give you a dollar okay and then what you can do is you can put the dollar in the envelope or you can put it in your pocket and I'm not gonna see what you do okay and then when you finish that Act you're gonna hand the envelopes to me and I'm going to turn around and if there's a dollar in an envelope I'm gonna add another dollar so if you gave me the envelope with a dollar in it I'm going to add another dollar it'll be two dollars in it if you gave me one without the dollar in it I'm not gonna add anything I'm gonna then switch envelopes and I'm gonna give you the envelope that the other person had originally with my additional contribution or not these are the payoffs from the prisoner's dilemma it's very easy to figure out that the only thing that you can do that is smart if you don't care about the other person which is our typical maintained hypothesis is to put the dollar in your pocket it's the best action whether or not the other person is putting the dollar in the envelope or in their pocket so a non banana head who doesn't care about what the other person gets will put the dollar in their pocket and the payoffs therefore will be that they each get one dollar whereas if they quote cooperated and both put a dollar in the envelope they'd each get two dollars but they can't do it and that's the you know the game theorists basic push to have you understand that people doing the best for themselves may not promote the social good it's the analog writ into game theory of the people with the forks okay so that's the starting point you all know that we're going to run by that what I want to talk about is what game theory has to say about this quote big problem of whether when people come together to engage in some kind of strategic situation the result of their doing the best for themselves will promote the social good and that's a different problem than Adam Smith was thinking of he was thinking of the world and it's different than the quote arrow-debreu world and the theorem that ball Russ equilibria are efficient and it's the beginnings of a research line that I've been interested in with my colleagues and that I want to introduce you to and talk about today so one of the ways of thinking about this problem let me go back a little bit you know this is a very basic problem you know in 2008 we had a real financial meltdown in this country and if you take a macro course it should be if you take any course you'll see a certain amount of people scratching their head and saying you know we really have to understand that better than we understand it well and if you hang around the economics department which I encourage you to do or you hang around booth you'll just see lots of people who are trying to figure out what happened and tell stories about it and trying to understand the extent to which we should let things be as they are or regulate more and you know if you decide to regulate it's not clear that the Cure will be better than the disease most people will agree that what happened in 2008 was not a very good event not just because of unemployment and and which spiked up in this country and went from 5% to 10% now back to 5% in Spain went to 25% still around 25% with youth unemployment at 50% you know these are these are large and significant numbers it's disturbing it should bother you as economists it should bother you because you want to understand it I mean forget about the bothering you because these are real people that should bother you too I would argue but it also should bother you because you know economics should be about understanding that kind of thing and we don't understand it as well as we would like to understand it I think that would be the general consensus statement credit markets locked up one of the things that I have done in my other life as I'm on the board of of corporations which are which care a lot about credit and they locked up you know you couldn't get loans I knew people who had very very successful businesses and they you know we'd been paying off their loans for years and years and years and they were wrecked rated AAA and all of a sudden these people couldn't get loans and you know they may have depended on loans to do their business they may have been in the auto rental business the way the auto rental business works is you get a loan and you buy cars and people show up and they write your cars and you pay back people right these are people who couldn't get loans it's a really businesses shut down so big thing to understand Nash John Nash won the Nobel Prize amazing movie by the way a beautiful mind is really worth seeing and if you get the the DVD it has material with John Nash giving a lecture I show that in my game theory class it's the same lecture that I that I give in game series it's quite terrific so John Nash was interested in this in this kind of problem of what happens when two people get together to exchange and that's where you can see most basically this problem of will people doing the best for themselves will that promote the social good so I'm not going to pick on the to leave again I know him well but I'm gonna pick on him anyhow so I'll pick on the two of you so here's the problem the problem is you come together to trade you're the seller and you have an object that that is worth zero to you you you don't value it and you're the buyer and you have an object that and you and you would like the object and it's worth one to you and so there's the possibility for gain here which should happen is that seller gives it the buyer the question is at what price okay there's there's one unit of surplus they could split the surplus and in fact what some of you might say as well you know fairness is an important principle you know if we have the two of you coming together you might just say okay we understand that there's a unit of surplus let's split the surplus let's do it right away it's not a not a stupid outcome now let's make it a little bit more interesting it's ten thousand dollars of surplus value and you don't know each other and you'll never see each other again and you're going to bargain hard and let's make it even a little bit more interesting than that let's say that as time goes by there's some kind of discounting you'd rather get the surplus today then get it later let's say if 10 days go by then half the surplus is gone how will you behave you'll never see each other again you'd never saw each other before it's all done a little bit more anonymously we're abstracting from the fact that you could go off and try and find other buyers so it's pretty narrow ok so this problem it's these things are quite interesting this problem was only taken up in in good rigorous way that gave a nice solution by at least both mathematical ideas and what made sense and what might happen and there's work by Stahl and Ariel Rubinstein you know very important for you to always look at-at who's around this place in the last week we had Toma Piketty who's been and he's is he still visiting Harris place here tell you now and then I think he's visiting Harris he gave a talk here you will continually have access to such remarkable people even beyond your remarkable professors and you should make use of this kind of thing in any way in any case Rubinstein was here he wasn't talking about this kind of thing but he solved the game theoretic problem putting into place a model the model was suggested by Stahl but he took a little further and he said ok let's look at it this way I'll let you make an offer of division of the surplus and then it'll be your job to say whether you accept it or and if you say not then you get to make an offer of division of the surplus a price at which the exchange takes place and you can say yes or no etc and it goes on it turns out to be a not unsophisticated gain and in basic courses in game theory you learn that there's a unique sub game perfect equilibrium of the game it depends on relative impatience I set the relative impatience equal in this case and if there's little time between offers which means that the discounting per period is small then this game will settle immediately with you making an offer which is I want approximately half of the surplus and it being accepted if they had different impatience then in fact the relative impatience would be an effect would be reflected in the original offer that's made but it's a difficult theorem to prove that mathematically you have to understand sub game perfect equilibrium which isn't too hard you have to understand infinite games to do the mathematics of it you would need you know analysis comes in three flavors here you would need the middle analysis course okay you really would have to understand compact sets and you'd really be using your um your mathematics oh it's a it's a highly non-trivial theorem he knows the proof so there are a few of here you here who know the proof but it's not it's not all that simple did I give a reasonable account yeah okay so so the big thing in that result was that it said that there wouldn't be delay to agreement it said there wouldn't be any period during which both lost out because there was discounting if it would have settled in the fifth period if it was possible for there to be an equilibrium that settled in the fifth period then it would be worthless they'd be left to divide you'd be getting your money later okay and you'd be getting the good later okay so that would be burning surplus so it's it's a result which modeled the idea of bargaining what model did in a very special way you know you could also say okay I'll let you shout out offers and I'll let you shout out responses anytime you want oh and people could be speaking on top of each other so you sort of have to make assumptions to get a rigorous handle on this but this is taken to be a very successful way of dealing with with that now there's a real there's a real problem because the world and this now starts taking you into the the research that interests me and it also introduces the work of one of your professors Roger Myerson this is a reasonably close description of what wins a Nobel Prize it's quite amazing and and a little bit unfair because it's I'll develop it a bit more but it's it's at the same time somewhat somewhat breathtaking take the same situation that I talked about but let's make it a bit more realistic and a little bit more interesting let's now let's see there's a like it is a pointer look at that okay so let's assume that the value to you instead of being 0 is either 0 or 8 you could think of you have to buy this and you're either buying in the price 0 or price 8 before you go into this little game where you're involved in selling it okay and the value to the buyer is either 2 or 10 so most of the time the buyer values it more than the seller there's one cell and the point 5 point 5 are probabilities so this one cell think of these is iid this happens with probability 1/4 where the seller has a higher valuation than the buyer and it shouldn't trade so when these two people sit down to bargain they don't know whether they're in a situation where it should trade should trade here should trade here should trade here it's evident everybody with me okay but 1/4 of the time it shouldn't trade if you calculate out the surplus that's available well 1/4 of the time there's no surplus 1/4 of the time there's two surplus 1/4 of the time to surplus 1/4 of the time 10 surplus so there's actually an expected value 7 half surplus here but you don't know whether there's a situation where there's surplus or not and you know without really having met before large amounts of money and you're really not caring about the person you're playing with you might sit down as you start to bargain and say well you know I want the buyer to believe that this cost me eight and then I'm not an eager seller and similarly you may want the seller to believe that you only have valuation to and you're not an eager buyer and it might take a little bit of time to actually work that out but I could look at the same game that we talked about a moment ago you offer a price okay yes no if no then you can counter offer a price and the difference between this game and the game that I put up before that Rubinstein solved is very very large the fact is that there is no equilibrium of this game with alternating offers which can settle every time right away every time it should what does that mean well the way that we talk about these things is nature picks values for each independently here it should settle right away here it should settle right away here it should settle right away and here it shouldn't settle there is no equilibrium of this game an equilibrium is more than sub game perfect equilibrium now you're at the end of the first year undergraduate course and you're talking about sequential equilibrium week sequential equilibrium and you're moving right along in terms of learning game theory so even the mathematical formulation of equilibrium in games where there's this is called asymmetric information the way it works is the seller knows what the cost was to her and the buyer knows what the value with the what the value is to him but they don't know the costs or values of the other person okay that's the asymmetric information you know even Roger Myerson is is is a major force in pushing the understanding of that he and Phil Rennie who's another major force for any teaching here are really writing papers on the frontiers of how to think about these kinds of game but no matter how you think about it it was meyerson's basic understanding of this kind of thing and in this particular instance formulated with mark Satterthwaite who's at Northwestern University another prominent economist in game theory with game theorists which shows is just no way of doing this and getting trade right away every time you should which means this waste okay so getting back to basic learning this is a story where game theory tells us that the invisible hand doesn't do so well it can't lead to trade right away every time it should lead to trade right away so you know we're trying to turn you into sophisticated people I don't know what the answer is to what we should have done to avoid 2008 but I'm trying to understand where the basic hooks are what the basic principles are what I should know in order to a pine on these big subjects in fact this is exactly what labor economists use to explain strikes they say why does strikes happen they happen because of asymmetric information okay the worker doesn't know the value to management of getting that strike done with and management doesn't know the cost to the worker of sitting out and striking those are private information and that private information leads to worlds where straight-out bargaining will not lead necessarily to efficiency it can't lead to efficiency in this case okay if you take it a step further you have the world of mechanism design does anybody have a question before I go on look at end very soon don't worry okay so the world of mechanism design what what the this is the little calculation to prove this Meyerson Satterthwaite result but the the world of mechanism design and this really is Roger meyerson's world and invention says the best thing that you can do here is is just have somebody who stands up there and says I know the uncertainty I don't know the valuations that each one of you have but I'm gonna have you play a game and the game is going to be this it's gonna be when a person declares that she's a zero and the other person declares that he's a two then they will trade 5/6 of the time at a price of two and etc and that imposed game is a way of sucking out as much surplus as you can but notice you're not sucking out all the surplus because there are cases where you should trade but you only trade 5/6 of the time ok so that you know this is this is an introduction to how game theorists get their hands on this kind of problem ok what is what is Sun and shine interested what does he do let me turn to that now in just concluding minutes I'm gonna quickly run by a couple of things here so what I and my colleagues have tried to develop is a theory of negotiation and instead of it just being the kind of problem we looked at here where there's one let's say object to be exchanged you look at problems that are a little bit more multi-dimensional a little bit more like like the world so we the the beans were spilled I was once president of the university okay and as president of the University I need somebody now still I'm gonna work with you now I would do things like hire this is terrible I'd I'm not so sure I should do this on the air but you you hire a Dean of the medical school now Dean's and medical schools typically make more than presidents of universities they make money like corporate exuberant they make millions and millions of dollars I'm not talking about Chicago wherever okay and in fact when you when you negotiate with them then a kind of negotiation you have let's say there's a a woman who is a candidate to be Dean and we talked this way we say look there there are many things that you might care about you might care about your wage sure but you might care about a job for your husband as a physicist we have a very good Physics Department in Chicago and you know they might be willing if I help things along a little bit to hire your husband I hear he's you know you're you're at Yale and I hear he's quite good and we'd be pleased to have them in the department and you know housing of course is important and we provide rather generous housing arrangements especially for high-level people so you know mortgages we can help you know we can give you a very very low rate arrange that and you know you may care about being able to hire outstanding people and so the the at the very beginning you're going to need something like forty million dollars to sprinkle around and bring people here from Yale and other places and and on the other hand I don't know how valuable each one of these dimensions are to you and you don't know how costly they are to me so for example you may have in your mind that boy you're gonna walk around and every time you see somebody you're gonna put your hand on their shoulder and you're gonna say well tell me about your family history anybody in your family who has a disease is this is what medical school deans do and you quickly find out that everybody has somebody in their family who needs medical care but some of those people may be graduates of the law school and I may have a Dean of the law school who will kill me if I turn over a wealthy prospect to a medical school Dean so there's an issue of who you'll have access to to raise money so the point is there are many dimensions when you are involved in a real negotiation if it's a union management negotiation what are the many dimensions well you might care about wages for different classes of workers you might care about medical benefits you might care about under what conditions can management go outside the higher labor the these are multi-dimensional contracts and the real problem in a negotiation is to find out which things are relatively valuable for you and relatively inexpensive for me what can we include in the contract what's the right contract and so this is a list taken from a book of thinking through this kind of thing and as just really a final part because I want to let you ask questions I can do a little bit more both experimentally with some of my co-authors and theoretically we think about situations where instead of there being let's do it a little bit differently than the labor management instead of there being one object that you're selling let's think of rugs there are 12 of them and the first rug may have a cost to you of 8 the second 0 the third 8 the 4th 0 I just took numbers iid equal probability 8 or 0 and on the other hand you may have valuations which are these and you know if you had some independence the the the expected value on each of these or the expected value for long strings of things or iid is kind of determinate you sort of know what the gains should be your problem is you don't know where they they can be found okay so we model this and it turns out that if one looks at negotiation as a multi-dimensional process then not just in this kind of situation but in other situations where the total surplus for rug is not even known you can do much better than would be suggested by the Meyerson Satterthwaite matrix that I was putting up there in getting getting into agreement so what's it really about it's a take on to what extent can people negotiating extract out surplus okay extract that full surplus especially when there is uncertainty and when there's asymmetric information is it as bad as is suggested by Meyerson Satterthwaite is it as bad as is used in labor economics to explain strikes or is the fact that these things are multi-dimensional a bit of a savings great saving grace if it's a bit of a saving grace then maybe the invisible hand gets a few points you know I mean my own feeling is there are points where there are places where the invisible hand is pretty nicely and where it does pretty poorly and I'm trying to understand the boundaries of where it does nicely and where it does poorly one of the things that I want you to take away is these are unsolved problems okay these this is this is not you know any it's a very alive subject and understanding the extent to which we want to allow markets to argue to just work without mediation understanding the extent to which we want to intervene when we want to intervene how we want to intervene that takes you back to the most basic questions in economics and these questions are alive I find that a bit chilling that in my in my department which is of course the best department the best economics department if I go around and I say okay well you know if people get together to bargain do you believe they'll suck out all the surplus or not there's just a little bit of predictability in terms of when I go to certain people I know they'll be pretty optimistic and I go to others and I think though they'll be a little less optimistic but what matters when should we intervene under what circumstances this is as much political science as it is economics you know the the arguments about when to intervene can affect what people will do politically even though then you have another bargaining problem where people are figuring out how the good thing and interventions will be for them so but but I hope this will show you that you know our subject is very alive you should push back hard because what we do is hard stuff we are correctly urging you to build analytic tools it's not because these analytic tools will solve all of these hard problems but it's because they're serious and complicated problems and it's pretty hard to know how to even begin to attack them without some analytic framework and it's you know it's great to have you here I tried to end in and early enough so you can ask a question or two yes okay so the book that both Roger Myerson and I have used when we've taught game theory and I think it's been the book that's that's been used is a book by Osborn called introduction to game theory it's quite an accessible book it's a textbook it has tons and tons of problems now there at the same time I really would urge you to to look at more popular accounts and in terms of what I'm doing here and in terms of trying to think how things will develop and in the future I really would push you to books like misbehaving like Farrah Fowler which is about as much about decision theory as it is about game theory what else would I recommend hey guys in the back help me out what do you what do you answer when people ask you about basic game theory books there there are now a bunch of decent yep who's Gibbins that's that's a very good book what's the title of it again that's another analytic book I was looking for something which was you know would give you a chatty introduction and I'm not doing well Oh game theory for applied economists by Gibbons still pretty analytic how about a popular book what's a good popular book all right I'm doing badly it's a good question yeah I'll give you I'll think about it and do some more anybody else well eat enjoy I'll stay up here and you question nope okay alright you were at a great school and you're remarkable remarkable remarkable people and you know I'm an old man I'm 75 tomorrow which is probably the age of your grandparents and and I have a I shouldn't say this I do have a grandson here but he doesn't come near economic so you won't see him any of you of course this and there's a very very very talented son of Grace who took game theory and is now at MIT graduate school so take statistics take mathematics but concentrate on what it's all about you know what is this all about and there are lots of parts of social equilibrium I gave a talk last night and it was it was an alumni event not of this University and and it was you know what should you study and it got into a discussion of what should we teach one of the things that's happening in universities is the number of people who were studying the humanities and has the less formal Social Sciences this kind of is kind of dwindling and in general when you get the first jobs there's a pretty good premium for doing economic you'll be doing this for a long time in your life whatever you wind up doing and and don't just go into there are great jobs there you know it's really it's really important to think about why you're interested what big issues are what your role will be in society writing well is really important arguing well is really important and don't forget those parts he studies philosophy I mean what I was talking about today it's basically philosophy which is I find very attractive so okay I'll stay down here thank you very much