The economic approach to 'theory of mind'.

Theory of mind (ToM) is a great evolutionary achievement. It is a special intelligence that can assess not only one's own desires and beliefs, but also those of others. Whether it is uniquely human or not is controversial, but it is clear that humans are, at least, significantly better at ToM than any other animal. Economists and game theorists have developed sophisticated and powerful models of ToM and we provide a detailed summary of this here. This economic ToM entails a hierarchy of beliefs. I know my preferences, and I have beliefs (a probabilistic distribution) about your preferences, beliefs about your beliefs about my preferences, and so on. We then contrast this economic ToM with the theoretical approaches of neuroscience and with empirical data in general. Although this economic view provides a benchmark and makes useful suggestions about empirical tendencies, it does not always generate a close fit with the data. This provides an opportunity for a synergistic interdisciplinary production of a falsifiable theory of bounded rationality. In particular, a ToM that is founded on evolutionary biology might well be sufficiently structured to have predictive power, while remaining quite general. We sketch two papers that represent preliminary steps in this direction.