The Importance of Being Intelligent

25 Pages Posted: 9 Oct 2022

See all articles by Shyam Sunder

Shyam Sunder

Yale University - School of Management; Yale University - Cowles Foundation

Date Written: May 11, 2021


Those using artificial intelligence (AI) in finance and other fields seek to meet or beat human intelligence by a chosen index of performance appropriate to each context. Efforts are focused on finding ways of increasing the intelligence of artificial agents through analysis, machine learning or other methods to achieve this goal. This paper reports on an effort in which the goal of gaining understanding of the properties of social institutions — markets in particular — is sought by populating them with minimally-intelligent agents (called zero-intelligence agents), and examining institutional performance. Computer simulations with Zero Intelligence (ZI) agents reveal robust outcomes in certain markets and sensitivity of others, to trader intelligence. Data analyses from simulations help to address some important questions about why certain markets, even when they are populated by cognitively-bounded human traders, yield outcomes predicted by models predicated on utility maximization, while other markets exhibit systematic deviations from such predictions. A certain kind of intelligence — extraction of social surplus—appears to be embedded in the rules and structure of markets and social institutions.

Keywords: Intelligence of matkets, zero-intelligence traders, computer simulations, predicting market behavior

JEL Classification: A12,B25,C6,D44,E1,F17,G17

Suggested Citation

Sunder, Shyam, The Importance of Being Intelligent (May 11, 2021). Available at SSRN: or

Shyam Sunder (Contact Author)

Yale University - School of Management ( email )

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P.O. Box 208200
New Haven, CT 06520-8200
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203-432-6160 (Phone)


Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

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