Recent years have witnessed an increasing number of attempts to reconstruct Marxian theory in forms that can be assessed by reference to currently received standards in various disciplines (economics and “analytic” philosophy, for example). The work has even been said to establish a new paradigm: “analytical Marxism.” One doesn't have to endorse this claim to recognize a good deal of merit in the work. Through creative application of state-of-the-art methods to traditional Marxian issues, researchers have promoted productive cross-fertilization with non-Marxian programs and have revealed many problems that must be resolved for fruitful development of Marxian theory. Marx's work can be relevant to today's problems only if it is examined from vantage points provided by subsequent scientific and philosophical achievements. Moreover, critical engagement with the best science of the day has been an essential part of the Marxian theoretical project from the beginning.

This is the second part of a two-part paper. It can be read independently of the first part provided that the reader is prepared to go along with the unorthodox views on game theory which were advanced in Part I and are summarized below. The body of the paper is an attempt to study some of the positive implications of such a viewpoint. This requires an exploration of what is involved in modeling “rational players” as computing machines.

What role, if any, should the government perform in a society? Two very different answers to this question have been provided by John Rawls and Robert Nozick. For Rawls, the government plays an important role in ensuring that the principles of justice are realized in the workings of society. For Nozick (1974), the role of government is limited to that of providing protection. The debate over these two views has led to the questioning of the entire liberal doctrine, a questioning that has taken place not only within intellectual circles, but also within the society at large.

In an interesting letter to Anna George, the daughter of Henry George, Bernard Shaw wrote: “Your father found me a literary dilettante and militant rationalist in religion, and a barren rascal at that. By turning my mind to economics he made a man of me” (George, 1979, p. xiii). I am not able to determine what making a man of Bernard Shaw would exactly consist of, but it is clear that the kind of moral and social problems with which Shaw was deeply concerned could not be sensibly pursued without examining their economic aspects. For example, the claims of property rights, which some would defend and some (including Shaw) would dispute, are not just matters of basic moral belief that could not possibly be influenced one way or the other by any empirical arguments. They call for sensitive moral analysis responsive to empirical realities, including economic ones.

Recent years have seen the flowering of a new literature on the economic nature of firms marked by a concern with their internal organization and contractual characteristics. Related literatures on the principal-agent problem and the theory of financial markets have also contributed to a better understanding of firms as economic institutions. However, the place of the concept of the ownership of the firm is poorly developed in most of this literature, with many writers either ignoring the concept entirely or arguing that it is of no importance. The purpose of the present article is to point out that the concept of ownership of firms is crucial to an understanding of internal governance issues. Most economists implicitly presume that firms must be ownable and saleable if they are to be operated efficiently, and recently this viewpoint has been made more explicit by writers such as Jensen and Fama and Williamson. Their point of view is to some degree at odds with views of the firm as a coalition, which frequently appear in the same literature, and even more fundamentally in conflict with conceptions of the firm as an association or polity within which greater or lesser degrees of democracy in governance may be pursued. The first purpose of this article is to show that the incompletely articulated position of the leading authors on the economics of organization is that the firm is a commodity and must be so for purposes of efficiency.

It is a familiar argument that advocates accommodating the so-called paradoxes of decision theory by abandoning the “independence” postulate. After all, if we grant that choice reveals preference, the anomalous choice patterns of the Allais and Ellsberg problems (reviewed in Section 3) violate postulate P2 (“sure thing”) of Savage's (1954) system. The strategy of making room for new preference patterns by relaxing independence is adopted in each of the following works: Samuelson (1950), Kahneman and Tversky's “Prospect Theory” (1979), Allais and Hagen (1979), Fishburn (1981), Chew and MacCrimmon (1979), McClennen (1983), and in closely argued essays by Machina (1982, 1983 [see the latter for an extensive bibliography]).

The Greek poets and philosophers, united in a belief that men and women perceive the world around them very poorly, for this reason describe much of human behavior as fumbling for happiness in the dark. By contrast, perception failure is anathema to the modern tradition, as even the most innocent sort plays havoc with modern preference axioms.