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The Economics of Love
Posted October 1st 2009 at 12:58 AM by Paul.
Updated October 1st 2009 at 01:11 AM by Paul. (warning lol)
Updated October 1st 2009 at 01:11 AM by Paul. (warning lol)
WARNING - THIS BLOG MAY CONTAIN MATERIAL THAT YOU FIND TO BE COMPLETE GIBBERISH. DO NOT MAKE REQUESTS FOR YOUR TIME BACK IF YOU PROCEED IN READING SAID MATERIAL.
One would think the demand for love would be high as it results in large amounts of utility, however there are many draw backs and uncertainties that make investors and consumers weary - and for good reason. It is the most volatile market there is, and requires a large joint investment by both parties.
Without rigorous investigation, measurements, and inspections it is impossible to know how much each investor is contributing. This results in an undesirable situation in which both investors have a default choice to take advantage of the situation and not invest as heavily. It follows closely with economic game theory.
Defect win much-lose much..............lose-lose
Although if both investors cooperate, they will each get the most benefit - the correct play is to defect as it will average better. If you defect, you will either win much, or lose. If you cooperate you will win, or lose a lot. Clearly defecting is the most efficient thing to do.
Obviously love does not follow gaming theory exactly, and varies largely (another reason love is a dangerous investment but we will cover that later). In many cases one could gather that by defecting, that party gets the support and self esteem from having a partner, but not risking as large of an investment; at the same time the partner bears the brunt of the investment (IE, risk). Also one might argue that through cooperation it would not only result in a better average for each party, but that it is the best option for both party - contrary to the chart. Even so, it would still be an irrational choice to make. In the scenario of losing each party tries to take advantage of the other by investing less, thus resulting in a failed investment and small loss by each side. Losing much would be the party that invests the most in the winning much scenario. This individual would be losing much as they would be investing the most yet getting little to no return on it, while the partner squanders the profit until the opportunity cost of staying in the partnership grows too high. This is just an effort of quantifying the results of different uses of the product.
When the opportunity cost of one of the investors grows high, they will leave the partnership in search for a scenario that grants them more returns - whether those returns are utility, monetary benefit, etc. The point is that if a scenario in which one partner is gaining the benefits, and the other is "losing much", eventually the marginal benefits the winning partner gains from this scenario will diminish. This is why it does not continue indefinitely.
Earlier it was mentioned that the product varies largely. This is because different consumers value it differently (much like any other product) but many consume it in such a way that it creates an externality cost for other users of the same product. This often creates confusion and makes it difficult to put a standard on the product. One would deduce that using rational thought, every consumer would use it in the same way - recreating the lose-lose scenario.
Seeing as the rational approach to love is losing - one may wonder why we make the initial investment in the first place. This could be attributed to the imperfection of a situation found outside any text book economics example. Information, including results, isn't always known. We are all producers and consumers, yet we never know ourselves the value of what we have nor what we want. What we do see is the opportunity cost - IE, what we could do other than playing this game. Often it is alluring as it provides quantified amounts of utility whereas love is a product full of misinformation that does not promise any returns of utility. It has the potential to return the largest amounts of utility, but it carries with it too much risk. The rational person would average the possible end results of love, and average the results of other investments and reach the conclusion that the other investments (whatever they may be) return more on average.
It’s in cases like this that I am glad we are not rational. It's our folly and our savior from the average and mundane. Ultimately all other endeavors have rapidly declining marginal utilities for me (IE, I'm a hopeless romantic)
I like economics as some may have noticed. Being an economic person I didn't flesh this out as much as I could have, as the opportunity cost would be too high (I must do homework, and I'm hungry) I wonder if anyone will read this?
One would think the demand for love would be high as it results in large amounts of utility, however there are many draw backs and uncertainties that make investors and consumers weary - and for good reason. It is the most volatile market there is, and requires a large joint investment by both parties.
Without rigorous investigation, measurements, and inspections it is impossible to know how much each investor is contributing. This results in an undesirable situation in which both investors have a default choice to take advantage of the situation and not invest as heavily. It follows closely with economic game theory.
Cooperate..............DefectCooperate win-win...........lose much-win much
Defect win much-lose much..............lose-lose
Although if both investors cooperate, they will each get the most benefit - the correct play is to defect as it will average better. If you defect, you will either win much, or lose. If you cooperate you will win, or lose a lot. Clearly defecting is the most efficient thing to do.
Obviously love does not follow gaming theory exactly, and varies largely (another reason love is a dangerous investment but we will cover that later). In many cases one could gather that by defecting, that party gets the support and self esteem from having a partner, but not risking as large of an investment; at the same time the partner bears the brunt of the investment (IE, risk). Also one might argue that through cooperation it would not only result in a better average for each party, but that it is the best option for both party - contrary to the chart. Even so, it would still be an irrational choice to make. In the scenario of losing each party tries to take advantage of the other by investing less, thus resulting in a failed investment and small loss by each side. Losing much would be the party that invests the most in the winning much scenario. This individual would be losing much as they would be investing the most yet getting little to no return on it, while the partner squanders the profit until the opportunity cost of staying in the partnership grows too high. This is just an effort of quantifying the results of different uses of the product.
When the opportunity cost of one of the investors grows high, they will leave the partnership in search for a scenario that grants them more returns - whether those returns are utility, monetary benefit, etc. The point is that if a scenario in which one partner is gaining the benefits, and the other is "losing much", eventually the marginal benefits the winning partner gains from this scenario will diminish. This is why it does not continue indefinitely.
Earlier it was mentioned that the product varies largely. This is because different consumers value it differently (much like any other product) but many consume it in such a way that it creates an externality cost for other users of the same product. This often creates confusion and makes it difficult to put a standard on the product. One would deduce that using rational thought, every consumer would use it in the same way - recreating the lose-lose scenario.
Seeing as the rational approach to love is losing - one may wonder why we make the initial investment in the first place. This could be attributed to the imperfection of a situation found outside any text book economics example. Information, including results, isn't always known. We are all producers and consumers, yet we never know ourselves the value of what we have nor what we want. What we do see is the opportunity cost - IE, what we could do other than playing this game. Often it is alluring as it provides quantified amounts of utility whereas love is a product full of misinformation that does not promise any returns of utility. It has the potential to return the largest amounts of utility, but it carries with it too much risk. The rational person would average the possible end results of love, and average the results of other investments and reach the conclusion that the other investments (whatever they may be) return more on average.
It’s in cases like this that I am glad we are not rational. It's our folly and our savior from the average and mundane. Ultimately all other endeavors have rapidly declining marginal utilities for me (IE, I'm a hopeless romantic)
I like economics as some may have noticed. Being an economic person I didn't flesh this out as much as I could have, as the opportunity cost would be too high (I must do homework, and I'm hungry) I wonder if anyone will read this?
Total Comments 3
Comments
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I read it, and it is AWSUMMMMMMMMMMMMMMMMMMM.
(Even though I kinda only got some of it.)Posted October 1st 2009 at 03:23 AM by łıттłe đяαgøи
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Oh wow, this was actually really interesting to read and you've made me think about this.
Doesn't it vary greatly on the consumers themselves, as well? As in what product they might invest in and their past experiences with any one or more of this range of products, as well?Posted October 1st 2009 at 12:51 PM by .Sarah.
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While there is some sense to it - its more of a spoof on using economics to interpret the past behavior of individuals and predicting the future behavior. Since that is what economists attempt to do = ] Love is a non-economic good though so it makes little sense to try to put a supply and demand on it. Its also an emotion, and in economics you often assume that all parties are perfectly rational. I can still try and have fun with it though. Perhaps I'll continue fleshing it out in an attempt to make sense of it.. or at least pseudo-sense :P .. and maybe propositions on creating more incentive to love lol.Posted October 1st 2009 at 03:15 PM by Paul.
