nash
I never saw
A Beautiful Mind, taking it on
good authority that the movie got the economics wrong. Hence it's unsurprising that a
Discover article referencing the movie also
gets the economics wrong:
Nash showed that in any competitive situation—war, chess, even picking up a date at a bar—if the participants are rational, and they know that their opponents are rational, there can be only one optimal strategy.
In fact, this is not at all what Nash showed. A
Nash equilibrium is a set of strategies in which -- keeping his opponents' strategies fixed -- no player can do better by changing his strategy. However, it's wrong to call this "optimal" -- for example, both players in the
Prisoner's Dilemma would be better off if they chose a non-Nash strategy. And the "only one" is blatantly wrong -- there are countless examples of games with
multiple Nash equilibria.
Anyway, apart from that, the article is actually pretty good. And as a bonus, it's about a couple of Caltech economists.