The Economics of Language

Abstract

Understanding human behaviour in decision problems and strategic interactions has wide-ranging applications in economics, psychology and artificial intelligence. Game theory offers the foundation for this understanding, based on the idea that individuals aim to maximize a utility function. However, the exact factors influencing the utility function remain elusive. While traditional models try to explain human behaviour as a function of the outcomes of available actions, recent experimental research reveals that linguistic content significantly impacts decision-making, thus prompting a paradigm shift from outcome-based to language-based utility functions. This shift is more urgent than ever, given the advancement of large language models, which have the potential to support humans in making critical decisions through language-based interactions. We propose sentiment analysis as a fundamental tool for this shift and take an initial step by analysing 61 experimental instructions from the dictator game, an economic game capturing the balance between self-interest and the interest of others, which is at the core of many social interactions. Our meta-analysis shows that sentiment analysis can explain human behaviour beyond economic outcomes. We hope this work encourages consideration of a new game-theoretical approach that highlights the role of language in economic decisions.