Political economy is the study of production and trade and their relations with law and government. As a discipline, political economy originated in moral philosophy, in the 18th century, to explore the administration of states' wealth, with "political" signifying the Greek word polity and "economy" signifying the Greek word "okonomie"; the earliest works of political economy are attributed to the British scholars Adam Smith, Thomas Malthus, David Ricardo, although they were preceded by the work of the French physiocrats, such as François Quesnay and Anne-Robert-Jacques Turgot. In the late 19th century, the term "economics" began to replace the term "political economy" with the rise of mathematical modelling coinciding with the publication of an influential textbook by Alfred Marshall in 1890. Earlier, William Stanley Jevons, a proponent of mathematical methods applied to the subject, advocated economics for brevity and with the hope of the term becoming "the recognised name of a science".
Citation measurement metrics from Google Ngram Viewer indicate that use of the term "economics" began to overshadow "political economy" around 1910, becoming the preferred term for the discipline by 1920. Today, the term "economics" refers to the narrow study of the economy absent other political and social considerations while the term "political economy" represents a distinct and competing approach. Political economy, where it is not used as a synonym for economics, may refer to different things. From an academic standpoint, the term may reference Marxian economics, applied public choice approaches emanating from the Chicago school and the Virginia school. In common parlance, "political economy" may refer to the advice given by economists to the government or public on general economic policy or on specific economic proposals developed by political scientists. A growing mainstream literature from the 1970s has expanded beyond the model of economic policy in which planners maximize utility of a representative individual toward examining how political forces affect the choice of economic policies as to distributional conflicts and political institutions.
It is available as a stand-alone area of study in certain universities. Political economy meant the study of the conditions under which production or consumption within limited parameters was organized in nation-states. In that way, political economy expanded the emphasis of economics, which comes from the Greek oikos and nomos. Political economy was thus meant to express the laws of production of wealth at the state level, just as economics was the ordering of the home; the phrase économie politique first appeared in France in 1615 with the well-known book by Antoine de Montchrétien, Traité de l’economie politique. The French physiocrats were the first exponents of political economy, although the intellectual responses of Adam Smith, John Stuart Mill, David Ricardo, Henry George and Karl Marx to the physiocrats receives much greater attention; the world's first professorship in political economy was established in 1754 at the University of Naples Federico II in southern Italy. The Neapolitan philosopher Antonio Genovesi was the first tenured professor.
In 1763, Joseph von Sonnenfels was appointed a Political Economy chair at the University of Vienna, Austria. Thomas Malthus, in 1805, became England's first professor of political economy, at the East India Company College, Hertfordshire. In its contemporary meaning, political economy refers to different yet related approaches to studying economic and related behaviours, ranging from the combination of economics with other fields to the use of different, fundamental assumptions that challenge earlier economic assumptions: Political economy most refers to interdisciplinary studies drawing upon economics and political science in explaining how political institutions, the political environment, the economic system—capitalist, communist, or mixed—influence each other; the Journal of Economic Literature classification codes associate political economy with three sub-areas: the role of government and/or class and power relationships in resource allocation for each type of economic system. Much of the political economy approach is derived from public choice theory on the one hand and radical political economics on the other hand, both dating from the 1960s.
Public choice theory is a microfoundations theory, intertwined with political economy. Both approaches model voters and bureaucrats as behaving in self-interested ways, in contrast to a view, ascribed to earlier mainstream economists, of government officials trying to maximize individual utilities from some kind of social welfare function; as such and political scientists associate political economy with approaches using rational-choice assumptions in game theory and in examining phenomena beyond economics' standard remit, such as government failure and complex decision making in which context the term "positive political economy" is common. Other "traditional" topics include analysis of such public policy issues as economic regulation, rent-seeking, market protection, institutional corruption and distributional politics. Empirical analysis includes the influence of elections on the choice of economic policy and forecasting models of electoral outcome
Cultural economics is the branch of economics that studies the relation of culture to economic outcomes. Here, ` culture' is defined by shared preferences of respective groups. Programmatic issues include whether and how much culture matters as to economic outcomes and what its relation is to institutions; as a growing field in behavioral economics, the role of culture in economic behavior is being demonstrate to cause significant differentials in decision-making and the management and valuation of assets. Applications include the study of social norms. Social identity, beliefs in redistributive justice, hatred, trust, family ties, long-term orientation, the culture of economics. A general analytical theme is how ideas and behaviors are spread among individuals through the formation of social capital, social networks and processes such as social learning, as in the theory of social evolution and information cascades. Methods include case studies and theoretical and empirical modeling of cultural transmission within and across social groups.
In 2013 Said E. Dawlabani added the value systems approach to the cultural emergence aspect of macroeconomics. Cultural economics develops from how wants and tastes are formed in society; this is due to nurture aspects, or what type of environment one is raised in, as it is the internalization of one’s upbringing that shapes their future wants and tastes. Acquired tastes can be thought of as an example of this, as they demonstrate how preferences can be shaped socially. A key thought area that separates the development of cultural economics from traditional economics is a difference in how individuals arrive at their decisions. While a traditional economist will view decision making as having both implicit and explicit consequences, a cultural economist would argue that an individual will not only arrive at their decision based on these implicit and explicit decisions but based on trajectories; these trajectories consist of regularities, which have been built up throughout the years and guide individuals in their decision-making process.
Economists have started to look at cultural economics with a systems thinking approach. In this approach, the economy and culture are each viewed as a single system where "interaction and feedback effects were acknowledged, where in particular the dynamic were made explicit". In this sense, the interdependencies of culture and the economy can be combined and better understood by following this approach. Said E. Dawlabani's book MEMEnomics: The Next-Generation Economic System combines the ideas of value systems and systems thinking to provide one of the first frameworks that explores the effect of economic policies on culture; the book explores the intersections of multiple disciplines such as cultural development, organizational behavior, memetics all in an attempt to explore the roots of cultural economics. The advancing pace of new technology is transforming how the public shares culture; the cultural economic field has seen great growth with the advent of online social networking which has created productivity improvements in how culture is consumed.
New technologies have lead to cultural convergence where all kinds of culture can be accessed on a single device. Throughout their upbringing, younger persons of the current generation are consuming culture faster than their parents did, through new mediums; the smartphone is a blossoming example of this where books, talk and more can all be accessed on a single device in a matter of seconds. This medium and the culture surrounding it is beginning to have an effect on the economy, whether it be increasing communication while lowering costs, lowering the barriers of entry to the technology economy, or making use of excess capacity; this field has seen growth through the advent of new economic studies that have put on a cultural lens. For example, a recent study on Europeans living with their families into adulthood was conducted by Paola Sapienza, a professor at Northwestern University; the study found that those of Southern European descent tend to live at home with their families longer than those of Northern European descent.
Sapienza added cultural critique to her analysis of the research, revealing that it is Southern European culture to stay at home longer and related this to how those who live at home longer have fewer children and start families thus contributing to Europe's falling birthrates. Sapienza's work is an example of how the growth of cultural economics is beginning to spread across the field. An area that cultural economics has a strong presence in is sustainable development. Sustainable development has been defined as "...development that meets the needs of the present without compromising the ability of future generations to meet their own needs...". Culture plays an important role in this as it can determine how people view preparing for these future generations. Delayed gratification is a cultural economic issue that developed countries are dealing with. Economists argue that to ensure that the future is better than today, certain measures must be taken such as collecting taxes or "going green" to protect the environment.
Policies such as these are hard for today's politicians to promote who want to win the vote of today's voters who are concerned with the present and not the future. People want to see the benefits now, not in the future. Economist David Throsby has proposed the idea of culturally sustainable development which compasses both the cultural industries and culture, he has created a set of criteria in regards to for which policy prescriptions can be compared to in order to ensure growth for future generations. The
Operations research, or operational research in British usage, is a discipline that deals with the application of advanced analytical methods to help make better decisions. Further, the term operational analysis is used in the British military as an intrinsic part of capability development and assurance. In particular, operational analysis forms part of the Combined Operational Effectiveness and Investment Appraisals, which support British defense capability acquisition decision-making, it is considered to be a sub-field of applied mathematics. The terms management science and decision science are sometimes used as synonyms. Employing techniques from other mathematical sciences, such as mathematical modeling, statistical analysis, mathematical optimization, operations research arrives at optimal or near-optimal solutions to complex decision-making problems; because of its emphasis on human-technology interaction and because of its focus on practical applications, operations research has overlap with other disciplines, notably industrial engineering and operations management, draws on psychology and organization science.
Operations research is concerned with determining the extreme values of some real-world objective: the maximum or minimum. Originating in military efforts before World War II, its techniques have grown to concern problems in a variety of industries. Operational research encompasses a wide range of problem-solving techniques and methods applied in the pursuit of improved decision-making and efficiency, such as simulation, mathematical optimization, queueing theory and other stochastic-process models, Markov decision processes, econometric methods, data envelopment analysis, neural networks, expert systems, decision analysis, the analytic hierarchy process. Nearly all of these techniques involve the construction of mathematical models that attempt to describe the system; because of the computational and statistical nature of most of these fields, OR has strong ties to computer science and analytics. Operational researchers faced with a new problem must determine which of these techniques are most appropriate given the nature of the system, the goals for improvement, constraints on time and computing power.
The major sub-disciplines in modern operational research, as identified by the journal Operations Research, are: Computing and information technologies Financial engineering Manufacturing, service sciences, supply chain management Policy modeling and public sector work Revenue management Simulation Stochastic models Transportation In the decades after the two world wars, the tools of operations research were more applied to problems in business and society. Since that time, operational research has expanded into a field used in industries ranging from petrochemicals to airlines, finance and government, moving to a focus on the development of mathematical models that can be used to analyse and optimize complex systems, has become an area of active academic and industrial research. In the 17th century, mathematicians like Christiaan Huygens and Blaise Pascal tried to solve problems involving complex decisions with probability. Others in the 18th and 19th centuries solved these types of problems with combinatorics.
Charles Babbage's research into the cost of transportation and sorting of mail led to England's universal "Penny Post" in 1840, studies into the dynamical behaviour of railway vehicles in defence of the GWR's broad gauge. Beginning in the 20th century, study of inventory management could be considered the origin of modern operations research with economic order quantity developed by Ford W. Harris in 1913. Operational research may have originated in the efforts of military planners during World War I. Percy Bridgman brought operational research to bear on problems in physics in the 1920s and would attempt to extend these to the social sciences. Modern operational research originated at the Bawdsey Research Station in the UK in 1937 and was the result of an initiative of the station's superintendent, A. P. Rowe. Rowe conceived the idea as a means to analyse and improve the working of the UK's early warning radar system, Chain Home, he analysed the operating of the radar equipment and its communication networks, expanding to include the operating personnel's behaviour.
This allowed remedial action to be taken. Scientists in the United Kingdom including Patrick Blackett, Cecil Gordon, Solly Zuckerman, C. H. Waddington, Owen Wansbrough-Jones, Frank Yates, Jacob Bronowski and Freeman Dyson, in the United States with George Dantzig looked for ways to make better decisions in such areas as logistics and training schedules The modern field of operational research arose during World War II. In the World War II era, operational research was defined as "a scientific method of providing executive departments with a quantitative basis for decisions regarding the operations under their control". Other names for it included quantitative management. During the Second World War close to 1,000 men and women in Britain were engaged in operational research. About 200 operational research scientists worked for the British Army. Patrick Blackett worked for several different organizations during the war. Early in the war while working for the Royal Aircraft Establishment he set up a team known as the "Circus" which helped to reduce the number of anti-aircraft artillery rounds needed to shoot down an enemy aircraft from an
François Quesnay was a French economist and physician of the Physiocratic school. He is known for publishing the "Tableau économique" in 1758, which provided the foundations of the ideas of the Physiocrats; this was the first work attempting to describe the workings of the economy in an analytical way, as such can be viewed as one of the first important contributions to economic thought. His Le Despotisme de la Chine, written in 1767, describes Chinese politics and society, his own political support for constitutional Oriental despotism. Quesnay was born at Méré near Versailles, the son of an advocate and small landed proprietor. Apprenticed at the age of sixteen to a surgeon, he soon went to Paris, studied medicine and surgery there, having qualified as a master-surgeon, settled down to practice at Mantes. In 1737 he was appointed perpetual secretary of the academy of surgery founded by François Gigot de la Peyronie, became surgeon in ordinary to King Louis XV. In 1744 he graduated as a doctor of medicine.
His apartments were on the entresol, whence the Réunions de l'entresol received their name. Louis XV esteemed Quesnay and used to call him his thinker; when he ennobled him he gave him for arms three flowers of the pansy, with the Latin motto Propter cogitationem mentis. He now devoted himself principally to economic studies, taking no part in the court intrigues which were perpetually going on around him. Around 1750 he became acquainted with Jacques C. M. V. de Gournay, an earnest inquirer in the economic field. The most remarkable men in this group of disciples were the elder Mirabeau, Nicolas Baudeau, Guillaume-François Le Trosne, André Morellet, Lemercier de La Rivière, du Pont de Nemours. Adam Smith, during his stay on the continent with the young Duke of Buccleuch in 1764–1766, spent some time in Paris, where he made the acquaintance of Quesnay and some of his followers. Quesnay married in 1718, had a son and a daughter, he died on 16 December 1774, having lived long enough to see his great pupil, Anne Robert Jacques Turgot, Baron de Laune, in office as minister of finance.
His economic writings are collected in the 2nd vol. of the Principaux économistes, published by Guillaumin, with preface and notes by Eugène Daire. His other writings were the article "Évidence" in the Encyclopédie, Recherches sur l'évidence des vérites geometriques, with a Projet de nouveaux éléments de géometrie, 1773. Quesnay's Eloge was pronounced in the Academy of Sciences by Grandjean de Fouchy. See F. J. Marmontel, Mémoires. In 1758 he published the Tableau économique, which provided the foundations of the ideas of the Physiocrats; this was the first work to attempt to describe the workings of the economy in an analytical way, as such can be viewed as one of the first important contributions to economic thought. The publications in which Quesnay expounded his system were the following: two articles, on "Fermiers" and on "Grains", in the Encyclopédie of Diderot and Jean le Rond d'Alembert; the Tableau économique, though on account of its dryness and abstract form it met with little general favor, may be considered the principal manifesto of the school.
It was regarded by the followers of Quesnay as entitled to a place amongst the foremost products of human wisdom, is named by the elder Mirabeau, in a passage quoted by Adam Smith, as one of the three great inventions which have contributed most to the stability of political societies, the other two being those of writing and of money. Its object was to exhibit by means of certain formulas the way in which the products of agriculture, the only source of wealth, would in a state of perfect liberty be distributed among the several classes of the community, to represent by other formulas the modes of distribution which take place under systems of Governmental restraint and regulation, with the evil results arising to the whole society from different degrees of such violations of the natural order, it follows from Quesnay's theoretic views that th
An economist is a practitioner in the social science discipline of economics. The individual may study and apply theories and concepts from economics and write about economic policy. Within this field there are many sub-fields, ranging from the broad philosophical theories to the focused study of minutiae within specific markets, macroeconomic analysis, microeconomic analysis or financial statement analysis, involving analytical methods and tools such as econometrics, economics computational models, financial economics, mathematical finance and mathematical economics; the professionalization of economics, reflected in academia, has been described as "the main change in economics since around 1900." Economists debate the path. It is a debate between a scholastic orientation, focused on mathematical techniques, a public discourse orientation, more focused on communicating to lay people pertinent economic principles as they relate to public policy. Surveys among economists indicate a preference for a shift toward the latter.
Most major universities have an economics faculty, school or department, where academic degrees are awarded in economics. Getting a PhD in economics takes six years, on average, with a median of 5.3 years. The Nobel Memorial Prize in Economics, established by Sveriges Riksbank in 1968, is a prize awarded to economists each year for outstanding intellectual contributions in the field of economics; the prize winners are announced in October every year. They receive their awards on the anniversary of Alfred Nobel's death. Economists work in many fields including academia, government and in the private sector, where they may "...study data and statistics in order to spot trends in economic activity, economic confidence levels, consumer attitudes. They assess this information using advanced methods in statistical analysis, computer programming they make recommendations about ways to improve the efficiency of a system or take advantage of trends as they begin."In contrast to regulated professions such as engineering, law or medicine, there is not a required educational requirement or license for economists.
In academia, to be called an economist requires a Ph. D. degree in Economics. In the US government, on the other hand, a person can be hired as an economist provided that they have a degree that included or was supplemented by 21 semester hours in economics and three hours in statistics, accounting, or calculus. A professional working inside of one of many fields of economics or having an academic degree in this subject is considered to be an economist. In addition to government and academia, economists are employed in banking, accountancy, marketing, business administration and non- or not-for profit organizations. Politicians consult economists before enacting economic policy. Many statesmen have academic degrees in economics. Economics graduates are employable in varying degrees depending on the regional economic scenario and labour market conditions at the time for a given country. Apart from the specific understanding of the subject, employers value the skills of numeracy and analysis, the ability to communicate and the capacity to grasp broad issues which the graduates acquire at the university or college.
Whilst only a few economics graduates may be expected to become professional economists, many find it a base for entry into a career in finance – including accounting, insurance and banking, or management. A number of economics graduates from around the world have been successful in obtaining employment in a variety of major national and international firms in the financial and commercial sectors, in manufacturing, retailing and IT, as well as in the public sector – for example, in the health and education sectors, or in government and politics. Small numbers go on to undertake postgraduate studies, either in economics, teacher training or further qualifications in specialist areas. In Brazil, unlike most countries in the world where the profession is not regulated, the profession of Economist is regulated by Law. 1411 of August 13, 1951. The professional designation of economist, according to the said law, is exclusive to the bachelors in economics graduates in Brazil. According to the United States Department of Labor, there were about 15,000 non-academic economists in the United States in 2008, with a median salary of $83,000 the top ten percent earning more than $147,040 annually.
Nearly 135 colleges and universities grant around 900 new Ph. D.s every year. Incomes are highest for those in the private sector, followed by the federal government, with academia paying the lowest incomes; as of January 2013, PayScale.com showed Ph. D. economists' salary ranges as follows: all Ph. D. economists, $61,000 to $160,000. D. corporate economists, $71,000 to $207,000. The largest single professional grouping of economists in the UK are the more than 1000 members of the Government Economic Service, who work in 30 government departments and agencies. Analysis of destination surveys for economics graduates from a number of selected top schools of economics in the United Kingdom, shows nearly 80 percent in employment six months after graduation – with a wide range of roles and employers, including regional and international organisations, across many sectors; this figure compares favourably with the national picture, with 64 percent of economics graduates in employment. Some current we
Financial economics is the branch of economics characterized by a "concentration on monetary activities", in which "money of one type or another is to appear on both sides of a trade". Its concern is thus the interrelation of financial variables, such as prices, interest rates and shares, as opposed to those concerning the real economy, it has two main areas of focus: corporate finance. The subject is concerned with "the allocation and deployment of economic resources, both spatially and across time, in an uncertain environment", it therefore centers on decision making under uncertainty in the context of the financial markets, the resultant economic and financial models and principles, is concerned with deriving testable or policy implications from acceptable assumptions. It is built on the foundations of microeconomics and decision theory. Financial econometrics is the branch of financial economics that uses econometric techniques to parameterise these relationships. Mathematical finance is related in that it will derive and extend the mathematical or numerical models suggested by financial economics.
Note though that the emphasis there is mathematical consistency, as opposed to compatibility with economic theory. Financial economics has a microeconomic focus, whereas monetary economics is macroeconomic in nature. Financial economics is taught at the postgraduate level. Specialist undergraduate degrees are offered in the discipline; this article provides an overview and survey of the field: for derivations and more technical discussion, see the specific articles linked. As above, the discipline explores how rational investors would apply decision theory to the problem of investment; the subject is thus built on the foundations of microeconomics and decision theory, derives several key results for the application of decision making under uncertainty to the financial markets. Underlying all of financial economics are the concepts of present value and expectation. Calculating their present value allows the decision maker to aggregate the cashflows to be produced by the asset in the future, to a single value at the date in question, to thus more compare two opportunities.
An immediate extension is to combine probabilities with present value, leading to the expected value criterion which sets asset value as a function of the sizes of the expected payouts and the probabilities of their occurrence. This decision method, fails to consider risk aversion. In other words, since individuals receive greater utility from an extra dollar when they are poor and less utility when comparatively rich, the approach is to therefore "adjust" the weight assigned to the various outcomes correspondingly.. Choice under uncertainty here may be characterized as the maximization of expected utility. More formally, the resulting expected utility hypothesis states that, if certain axioms are satisfied, the subjective value associated with a gamble by an individual is that individual's statistical expectation of the valuations of the outcomes of that gamble; the impetus for these ideas arise from various inconsistencies observed under the expected value framework, such as the St. Petersburg paradox.
The concepts of arbitrage-free, "rational", pricing and equilibrium are coupled with the above to derive "classical" financial economics. Rational pricing is the assumption that asset prices will reflect the arbitrage-free price of the asset, as any deviation from this price will be "arbitraged away"; this assumption is useful in pricing fixed income securities bonds, is fundamental to the pricing of derivative instruments. Economic equilibrium is, in general, a state in which economic forces such as supply and demand are balanced, and, in the absence of external influences these equilibrium values of economic variables will not change. General equilibrium deals with the behavior of supply and prices in a whole economy with several or many interacting markets, by seeking to prove that a set of prices exists that will result in an overall equilibrium; the two concepts are linked as follows: where market prices do not allow for profitable arbitrage, i.e. they comprise an arbitrage-free market these prices are said to constitute an "arbitrage equilibrium".
Intuitively, this may be seen by considering that where an arbitrage opportunity does exist prices can be expected to change, are therefore not in equilibrium. An arbitrage equilibrium is thus a precondition for a general economic equilibrium; the immediate, formal, extension of this idea, the fundamental theorem of asset pricing, shows that where markets are as described —and are additionally complete—one may make financial decisions by constructing a risk neutral probability measure corresponding to the market. "Complete" here means that there
Game theory is the study of mathematical models of strategic interaction between rational decision-makers. It has applications in all fields of social science, as well as in computer science, it addressed zero-sum games, in which one person's gains result in losses for the other participants. Today, game theory applies to a wide range of behavioral relations, is now an umbrella term for the science of logical decision making in humans and computers. Modern game theory began with the idea regarding the existence of mixed-strategy equilibria in two-person zero-sum games and its proof by John von Neumann. Von Neumann's original proof used the Brouwer fixed-point theorem on continuous mappings into compact convex sets, which became a standard method in game theory and mathematical economics, his paper was followed by the 1944 book Theory of Games and Economic Behavior, co-written with Oskar Morgenstern, which considered cooperative games of several players. The second edition of this book provided an axiomatic theory of expected utility, which allowed mathematical statisticians and economists to treat decision-making under uncertainty.
Game theory was developed extensively in the 1950s by many scholars. It was explicitly applied to biology in the 1970s, although similar developments go back at least as far as the 1930s. Game theory has been recognized as an important tool in many fields; as of 2014, with the Nobel Memorial Prize in Economic Sciences going to game theorist Jean Tirole, eleven game theorists have won the economics Nobel Prize. John Maynard Smith was awarded the Crafoord Prize for his application of game theory to biology. Early discussions of examples of two-person games occurred long before the rise of modern, mathematical game theory; the first known discussion of game theory occurred in a letter written by Charles Waldegrave, an active Jacobite, uncle to James Waldegrave, a British diplomat, in 1713. In this letter, Waldegrave provides a minimax mixed strategy solution to a two-person version of the card game le Her, the problem is now known as Waldegrave problem. In his 1838 Recherches sur les principes mathématiques de la théorie des richesses, Antoine Augustin Cournot considered a duopoly and presents a solution, a restricted version of the Nash equilibrium.
In 1913, Ernst Zermelo published Über eine Anwendung der Mengenlehre auf die Theorie des Schachspiels. It proved that the optimal chess strategy is determined; this paved the way for more general theorems. In 1938, the Danish mathematical economist Frederik Zeuthen proved that the mathematical model had a winning strategy by using Brouwer's fixed point theorem. In his 1938 book Applications aux Jeux de Hasard and earlier notes, Émile Borel proved a minimax theorem for two-person zero-sum matrix games only when the pay-off matrix was symmetric. Borel conjectured that non-existence of mixed-strategy equilibria in two-person zero-sum games would occur, a conjecture, proved false. Game theory did not exist as a unique field until John von Neumann published the paper On the Theory of Games of Strategy in 1928. Von Neumann's original proof used Brouwer's fixed-point theorem on continuous mappings into compact convex sets, which became a standard method in game theory and mathematical economics, his paper was followed by his 1944 book Theory of Games and Economic Behavior co-authored with Oskar Morgenstern.
The second edition of this book provided an axiomatic theory of utility, which reincarnated Daniel Bernoulli's old theory of utility as an independent discipline. Von Neumann's work in game theory culminated in this 1944 book; this foundational work contains the method for finding mutually consistent solutions for two-person zero-sum games. During the following time period, work on game theory was focused on cooperative game theory, which analyzes optimal strategies for groups of individuals, presuming that they can enforce agreements between them about proper strategies. In 1950, the first mathematical discussion of the prisoner's dilemma appeared, an experiment was undertaken by notable mathematicians Merrill M. Flood and Melvin Dresher, as part of the RAND Corporation's investigations into game theory. RAND pursued the studies because of possible applications to global nuclear strategy. Around this same time, John Nash developed a criterion for mutual consistency of players' strategies, known as Nash equilibrium, applicable to a wider variety of games than the criterion proposed by von Neumann and Morgenstern.
Nash proved that every n-player, non-zero-sum non-cooperative game has what is now known as a Nash equilibrium. Game theory experienced a flurry of activity in the 1950s, during which time the concepts of the core, the extensive form game, fictitious play, repeated games, the Shapley value were developed. In addition, the first applications of game theory to philosophy and political science occurred during this time. In 1979 Robert Axelrod tried setting up computer programs as players and found that in tournaments between them the winner was a simple "tit-for-tat" program that cooperates on the first step on subsequent steps just does whatever its opponent did on the previous step; the same winner was often obtained by natural selection. In 1965, Reinhard Selten introduced his solution concept of subgame perfect equilibria, which further refined the Nash equilibrium. In 1994 Nash and Harsanyi became Economics Nobel Laureates for their contributi