Why Personal Economics?

Economics can be seen as the study of choices given scarce resources. Every day we have to make choices which govern our lives and sometimes even the lives of others. From economics we can find many different studies, such as Game Theory, Finance, or Behavior. Many people think of economics only in the financial aspects, but they lose out on the other benefits.

We utilize economics every day. In fact, once you start learning economics you see it everywhere. The reason is that you are making choices and you are weighing the benefits which the choice is giving you. Sometimes this is seen as utility, the uncountable product which lives in us all. Some people may be aware of the theory of utilitarianism, and this is basically the essence of the theory. Utility is how be index our choices, but the problem is actually knowing our own index. We may not even be aware of all of the choices available to us, and that is why I argue with my professors. The study of economics is based on rational choices. Besides the initial argument that every one acts irrationally, think a little further and realize that there is a rationality in what we do. 

The general argument against irrational behavior can be that of the all-encompassing idea of utility. If love has some impact on your personal utility, then some actions under the "love" category in your mind will yield an influence in your decision making. It is a large, expansive tree of decision making that is nearly impossible to categorize, but we may assume it exists. 

Game theory is how we interact with others based on our perceptions of what the other will do. The most basic example available is the prisoner's dilemma which can be found using Google as I do not care to discuss it's whole concept here, but here is a snippet from Principia Cybernetica Web:

Cooperation is usually analysed in game theory by means of a non-zero-sum game called the "Prisoner's Dilemma" (Axelrod, 1984). The two players in the game can choose between two moves, either "cooperate" or "defect". The idea is that each player gains when both cooperate, but if only one of them cooperates, the other one, who defects, will gain more. If both defect, both lose (or gain very little) but not as much as the "cheated" cooperator whose cooperation is not returned. The whole game situation and its different outcomes can be summarized by table 1, where hypothetical "points" are given as an example of how the differences in result might be quantified.

In other words, the whole purpose of what I am trying to do is put my two cents in on choices which are possible which relate to ourselves and why they may be beneficial or harmful to ourselves. Many of my posts so far have been to describe this relationship, and sometimes they are little things which I find interesting. These are chapters in my personal economics.