Agreed. But here is what I think Hofstadter was saying: The assumption that is used can be weaker than the assumption that the two players have an identical method. Rather, it just needs to be that they are both "smart". And this is almost as strong a result as the true zero knowledge scenario, because most agents will do their best to be smart.
Why is he saying that "smart" agents will cooperate? Because they know that the other agent is the same as them in that respect. (In being smart, and also in knowing what being smart means.)
Now, there are some obvious holes in this, but it does hold a certain grain of truth, and is a fairly powerful result in any case. (TDT is, in a sense, a generalization of exactly this idea.)
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Pretty much. I've actually gotten in a debate with a Randian on Facebook about what constitutes evidence. He doesn't seem to like Bayes' Theorem very much - he's busy talking about how we shouldn't refer to something as possible unless we have physical evidence of its possibility, because of epistemology.
That's contrary to my experience of epistimology. It's just a word, define it however you want, but in both epistemic logic and pragmatics-stripped conventional usage, possibility is nothing more than a lack of disproof.