Review of Austrian Economics, 13: 41–58 (2000)
2000 Kluwer Academic Publishers
Austrian Economics and Game Theory: A
Stocktaking and an Evaluation
LINK, Department of Industrial Economics and Strategy, Copenhagen Business School, Nansensgade 19,6,
1366 Copenhagen K, Denmark
Abstract. I discuss the merits and drawbacks of game theory in economics from the perspective of Austrian
economics. I begin by arguing that Austrians have neglected game theory at their peril, and then suggest that game
theoretic reasoning could be one way of modelling key Austrian insights. However, admittedly some aspects of
game theory don’t square easily with Austrian economics. Moreover, a major stumbling block for an Austrian
acceptance of game theory may lie in the traditional Austrian resistance to formal methods.
JEL classiﬁcation: B21, C70, D5.
This paper is founded on the conviction that in order for the Austrian critique of mainstream
economics to have true bite and relevance, Austrians should be aware of and relate to the
latest advances in mainstream economics. This may sound as a truism, but it is nevertheless
the case that the Austrians have been particularly bad at relating to one very important trend
in the development of mainstream economics during the last two decades: the rise of game
theory. This is a serious problem for several reasons, most notably for the simple reason
that game theory is so crucially important in contemporary mainstream economics.
As Franklin Fisher (1990:113) noted, in the nineteen-eighties, “...game theory came to
the ascendant as the premier fashionable tool of microtheorists”, and it has certainly not
lost that position, as inspection of virtually any mainstream journal will conﬁrm. Thus, the
arguably major mainstream theoretical advances in the 1980s and 1990s, such as the theory
of contracts and the theory of auctions, have been almost completely driven by game
Though admittedly simplistic, there is much to say in favor of the view—
put forward with much force by Rizvi (1994)—that general equilibrium theory died and
game theory to a very large extent took over as the analytical core of modern mainstream
economics. However, Austrians continue to direct their criticisms at general equilibrium
theory (e.g., Kirzner 1997, Boettke 1996), butneglect game theory. They do so at their peril.
The amazing growth of inﬂuence of game theory in economics is in itself an important
reason why Austrians should take a stand on game theory. A further reason is that game
theory has been argued to address exactly the dynamics of the market process that Austrians
The comments of Pierre Garrouste, Ulrich Witt and two anonymous reviewers of this journal are acknowledged