John Forbes Nash

The world of economics is in shock following the announcement that mathematician and economist John Forbes Nash and his wife, Alicia, died today in a car crash involving the taxi they were travelling in, which went out of control near Monroe Township, Middlesex County, New Jersey.

Nobel Prize winner, John Nash, aged 86, inspired generations of economics students, as well as being the subject of the Oscar winning film, A Beautiful Mind.  John Nash is best remembered in economics for his ground breaking work on game theory, which won him the  Nobel Prize for Economics in 1994.

Russell Crowe, who played him in the film has tweeted: “Stunned… My heart goes out to John & Alicia & family. An amazing partnership. Beautiful minds, beautiful hearts.”

In game theory, Nash equilibrium is a solution to a game involving two or more players who want the best outcome for themselves and must take the actions of others into account.

John Nash

According to Nash, when equilibrium is reached, players cannot improve their payoff by independently changing their strategy. This means that it is the best strategy assuming the other has chosen a strategy and will not change it. For example, in the Prisoner’s Dilemma game, confessing is a Nash equilibrium because it is the best outcome, taking into account the likely actions of others.  This proposition led economists to question one of the fundamtenal assumptions of traditional economics – that all economic agents act selfishly in the pursuit of their interest.

See also:

Prisoner’s Dilemma

Game theory