Rothschild Prize

Ariel Rubinstein, Professor of Economics at Tel Aviv University and at New York University develops original and innovative economic models and methodologies, and it was in recognition of his work in this field that he was awarded the Israel Prize in 2001-2002. 'The primary driver behind my work has not been to construct models which purport to prophesy the future. I do not think that is possible, given the tools of theoretical economics.The majority of my research concerns formal theoretical economic models using game and decision-making theory. I have always been fascinated by the fact that it is possible to house everyday terminology within mathematical constructs and thereby gain insights into the real world using game theory. For me a model is no different from a fable. And just as we are able to discern some essential reality about the world through fables, so it is with economic models. We receive insights from them and return wiser from them to the world.'

Professor Rubinstein's academic career can be divided into several stages. In the first, the stage of fascination with formal models, he studied repetitive games (here his work paralleled that of Robert Aumann and Lloyd Shapley) in models of economics, law and bargaining. His best-known work from this period dealt with the problem of bargaining in game theory. Bargaining is the most basic interaction in economics, where two people attempt to reach an agreement despite their conflicting interests. In a way, Professor Rubinstein's 1982 model was an extension of John Nash's work in the 1950s. These efforts led him to build models of economic interaction (in collaboration with Asher Wolinsky) in which price does not play a role and where commerce is the outcome of searching and bargaining. These models provide the foundation for models of the market.

Beginning in the mid-1980s, Professor Rubinstein concerned himself with models of blocked or inhibited rationality. These depart from the underlying assumption behind traditional theory which holds that individuals act with perfect rationality; instead, he took into consideration the possibility of limitations on the individual's thinking, his understanding of his surroundings and on his ability to communicate. These models flew in the face of orthodox economics which maintained until very recently that what guide the individual are purely materialistic interests and the desire to function in a perfect economic environment.

Together with Kobi Glazer, he took an interest in pragmatics. 'Using the tools of theoretical economics, we tried to understand the rules governing the interpretation of everyday statements and expressions (over and above their logical content) by looking at language as a mechanism for the transfer of information between interested parties.' Over the last decade, he has focused on economic methodologies and on the implications that economic theory and education in economics have had on the world. He began to work with experimental economics and even with neuro-economics out of the conviction that no methodological discussion is possible until people are more deeply acquainted with their discipline.