Week 12

Theory is used in many places and many fields. You can say that the world is based on a single theory. Economics you can use theory to predict how the stock market will rise and fall based on previous events that have occurred. The most important thing that people should know is that theory is what we base everything on, fact is in a sense fictional. It is easier to say that fact is fictional than it really is but for instance, a fact is that the sun is yellow but it is not a fact that if the stock market is going up and down, then it will stay for ever going up and down. Or even biology "a much easier example" it is the study of the body, we dont factually know what everything does in your body but we have an idea of how things react with each other and how it works, scientists say that we only use 8% of our entire brain, we have no clue what the other 92% does but we can make educated guesses.

Game theory is used in all sorts of different areas of study as I have been mentioning, this forms peoples beliefs.  The prisoner's dilemma is a great example of game theory in real life, you have two choices, either rat your friend out, or to stay silent when a cop is interrogating you. If you stay silent you and your friend will serve 3 months in prison but if you confess then you have a chance of going to prison for a year and if you stay silent you have a chance of a year in jail. Remember you are in another interrogating room than your friend, you can trust him or not, this is a basic premice of the theory. It brings up an ethical question, Should I confess to a crime becuase I think my friend is or should I stay silent and my friend does? It brings up the trust question which is relied on between beings.

You have Nash's Equilibrium Theory which touches upon dominant stratey and maximizing solutions for non-sum games, basically as Prof. Hansen put it, "both sides select a strategy and neither side can independently change its stratey without ending up in a less desirable postion.

Equilibrium Theory:The Nash Theorem maintains its focus on rivalries with mutual gain; a perceptual focus of Nash's mathematical vision found in the light of Leon Walrus' General Equilibrium Theory (published 1874) and John von Neumann's and Oskar Morgenstern's theory of games (1944), now simply called Game Theory. Nash later established his own idea of dominant strategy equilibria through maximization solutions for zero-sum games. He did this with original mathematical techniques to demonstrate the existence of methods for finding a measurable equilibrium in a general class of non-cooperative games.
(http://www.iscid.org/encyclopedia/Nash_Equilibrium)


The point of game theory is to educate people that everything correlates with each other in life. Everything goes together, no matter if you are playing a video game, board game, trying to win an election or trying to chase your million dollar dream of playing the stock market, game theory teaches you to evaluate a situation and look at all of the odds, dominant straties, risks, opportunities, costs, everything they tie with each other, game theory applies to life.

I am not a mathematician so Nash's actual equation is a bit complicated but when you read the context of what it means, he implemented rule that there is a equilibria to everything a balance, but in economics, it theoretically should work. It doesn't always work because we are not in a perfect system.

Game Theory in all is very uselful. The class has helped me over the past weeks to understand a more abstract view of life.