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R. Sundaram

John Charles Harsanyi was not only an outstanding economist but also a philosopher who saw in game theory a means of improving human conditions.

A FEW months ago, ardent fans of Hollywood cinema were treated to an unforgettable movie, A Beautiful Mind, an award winner dealing with the real life story of the Nobel Laureate, John Nash. What made the picture poignant was the central character's struggle with schizophrenia, and the hero halloed was the Nobel Prize for economics awarded to him. That John Nash shared the Nobel Prize for his work on game theory with two other eminent economists, John Harsanyi and Reinhard Selten, may not be remembered except by the cognoscenti.

Harsanyi, who died two years ago on this day (August 9), was not only an outstanding economist but also a philosopher who saw in game theory a means of improving human conditions.

The Economics Nobel is something of a step child, unlike physics, chemistry, medicine, literature and peace. Alfred Nobel, the Swedish industrialist, did not have the dismal science in mind when he wrote his will creating the Nobel Prizes. In fact, for economics it is "The Central Bank of Sweden Prize in memory of Alfred Nobel". Over the years, it has become the ultimate symbol for excellence in Economics.

The outstanding contribution of the trio to the game theory is a set of widely recognised tools for a variety of applications for analysing rivalry and cooperation among a small number of rational people with a mix of conflicting and similar interests: People, government and corporations and even animal species.

John Charles Harsanyi was born on May, 29, 1920 at Budapest in Hungary. As a young man, Harsanyi studied philosophy and mathematics in Budapest. To please his parents, who were comfortably off running a pharmacy, he majored in chemistry too. When Hungary entered the Second World War on the side of Germany, Harsanyi, being a Jew, was imprisoned. He was with a group to be sent to a concentration camp when he removed the yellow star the Jews had to wear and walked away. A guard stopped him, he was lucky, not all his countrymen were Nazis and he let him go. After Hungary became a Communist country, he was hounded for his outspoken anti-Marxist stance. Therefore, in 1950, he moved to Australia after escaping to Austria to be as far away from Europe as possible. Australians did not recognise his degrees from Hungary and so he had to work as a factory hand for several years while studying part-time for acquiring Australian ones.

However, being irrepressibly brilliant, he moved swiftly up the academic ladder first in Australia and then in the US where he moved as a scholar to start with. He remained a professor in the business school at the University of California in Berkeley for 26 years. At its simplest, the game is theory is all about applying mathematical logic to the human urge of playing games and in a way for "saving the players from going mad''.

In devising a winning strategy, you know that your rival may know what you are planning and he knows that you know he knows and so on. In real life games, we have imperfect knowledge about our opponents and so we resort to guessing and that if we are lucky we succeed. Harsanyi demonstrated that such games need not be entirely left to chance and that it is possible to analyse them and provide guidance about the probable moves and their outcomes.

Game theory, over the years has been gainfully applied to commerce, currency market, diplomacy, politics and even sports. A Dutch team of economists applying the theory to international football concluded that "a bad team playing at home is more likely to score than a good one playing away". At about the same time as Harsanyi was receiving his Nobel in 1994 along with the others, the greatest auction for wireless waves was announced in the US making it eventually the biggest sale of public assets in American history at more than $7 billion — the auction itself devised by blue-sky economic theoreticians advising government and corporations on the application of game theory.

What spurred Harsanyi's interest in game theory in the early 1950s was the John von Neumann and Oskar Morgenstern's book (1944), The Theory of Games and Economic Behaviour, which dealt with utility functions in welfare economics and in ethics.

Coincidentally, the versatile genius he was, von Neumann was also born in Hungary and attended the same school as Harsanyi. His interest in game-theoretic problems in a narrower sense was first aroused by John Nash's four brilliant papers, published in the period 1950-53, on cooperative and on non-cooperative games, on two-person bargaining games and on mutually optimal threat strategies in such games, and on what is now called Nash equilibria.

Harsanyi published four books. One of them, Rational Behaviour and Bargaining Equilibrium in Games and Social Situations (1977), was an attempt to unify game theory by extending the use of bargaining models from cooperative games also to non-cooperative games.

Two books, Essays on Ethics, Social Behaviour, and Scientific Explanation (1976) reviewed as a `hardread', and Papers in Game Theory (1982), were collections of some of his journal articles.

Finally a book on The theory of Equilibrium selection in Games with Reinhard Selten, the title indicating its content. Game theory demands tricky mathematics such as string theory of physics.

Though Harsanyi was among the select and gifted band of thinkers whose intense intellectual interest is aroused by such esoteric subjects he earnestly attempted to address, with the help of the tools he created some of the human concerns.

(The author is former Member, Ordnance Board, Kolkata.)

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