Bring up Choices – How an Economist Might See Them

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One of my favourite activities is to sit down next to a window, at a coffee shop, on a busy street, and watch people go about their daily lives. Sometimes you will capture interesting scenes such as a couple arguing or an older woman being ecstatic while on the phone, or perhaps two strangers giving each other flirting stares. I like to imagine what is going on in their minds or their lives at that moment. Maybe the couple is arguing about how one of them forgot the other’s birthday: trust me, it’s bad news if you do! Perhaps, the person receiving the phone call just got the news that she will be a grandmother for the first time. Maybe the strangers are not strangers after all. Perhaps, they just finished going on their second date and agreed to make their relationship official.

I have always been interested in human behaviours, and I have always wanted to understand them – from a distance. I am not too keen on being in large crowds or being surrounded by a lot of people. I like being in my little bubble and ignored for the most part. In fact, in recent times, I have been much more curious about the choices we make. Why do some people buy Apple products rather than Samsung products? Why do we have a particular “type” of people we prefer to date? How do we decide which job to apply to? Because I like to observe people from a distance, like a fly on a wall, I have a penchant for theoretical things rather than applied things: I like to think, imagine, and ponder.

Now, if I said: I want to go to College and study human behaviours and the choices we make. What would you suggest? Psychology? Sociology? Commerce/business? Neuroscience? Mathematics? What about Economics? Would you have suggested Economics? Most would not. For some reason, when I tell people that I study Economics, they ask me about the current hot stocks to buy, what do I think about the housing market, or what policies the government should adopt to boost our economy. I typically answer: “Sorry – I have no idea, and I don’t really care all that much, to be honest.” I am a theoretical Game Theorist and Market Designer. And, this is the way I see the world around me.

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Each person in a given situation of interest is called a player or agent. Each player has choices they can make. They are sometimes referred to as actions, strategies, or alternatives. Each choice results in a level of satisfaction which is called a payoff. For example, choosing an apple product over a Samsung product must imply that somehow, you preferred the apple product at that moment. Then, we could say that buying the apple product was more satisfying and thus provided you with a higher payoff. There are different approaches to state that you prefer, say, Mac computers over Alienware computers. One of them is revealed preferences: since I saw you buy a Mac computer, whereas the only other option was Alienware computers, then you revealed to me, from your choice, that you preferred Mac computers. Another is the classical axioms of consumer preference, which would require us to dive deep into set theory. These axioms ensure that every player makes rational choices and that these choices are “well-defined.” Amongst these axioms, there is transitivity. A transitive preference is: if I prefer A to B and I prefer B to C, then it must be that I prefer A to C.

I have come across many who have told me: “economics is faulty because humans are not rational beings, but you assume that they are.” I typically respond by paraphrasing one of my undergraduate professors from Bishop’s University:

In economics, we say that every person is rational because they make the best feasible choice in the given situation they find themselves in.

Recall a time where someone accused you of being irrational. That individual was most likely comparing your current state to your “normal” state. That is, the difference in your behaviour is what made them believe that you were being irrational. However, in economics, we look at every infinitesimal timestamp, as well as their environment. These elements are used to determine what actions are feasible to you. Given these feasible actions, your choice of action is rational. Hence, agents behave ‘rationally.’ Immediately, you will notice that an economist’s definition of rationality is different from the everyday use of the word ‘rational.’ So, does this mean that classical preferences and revealed preferences explain every choice we make? At this moment in time: no. The concept of preferences is highly theoretical, and thus we must conduct experiments to show that they are correct. Mathematically, they make sense, but experimentally, sometimes things do not go according to plan. So, when experiments do not match the theory, what does one do? We reevaluate the hypothesis. In fact, we say that classical preferences and revealed preferences hold under certain assumptions.

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So, we have players, strategies, preferences and payoffs, and rational agents. These are the building blocks I use. The next step is to ask myself: why would a player want to make a certain choice? That is, I seek the incentives of each player and determine what kind of strategies I am dealing with. If choice A gives you a higher payoff than choice B, then would it not be better for you to choose A? Would A not strictly dominate choice B? By doing so, it is sometimes possible to conjecture a reasonable outcome or solution. The only problem is that our choices are usually conditional on something else. In Game Theory, choices are typically conditional on other players’ choices. Then, we would specify that your choice A strictly dominates your choice B, if its payoff is higher, conditional on the other players’ choices. This theory works very well if everyone knows everyone’s set of actions.

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coach edwin indarto | unsplash.com

On the other hand, it is much more realistic to consider the fact that we do not know with certainty what another person will do. Think about the game rock-paper-scissors. Do you know for sure what the other person will choose? No. However, you can have a belief of what they will do. You may tell yourself: “Oh, this person always chooses paper. So I will go with scissors.” Since there is a probability that they will not choose paper, it is only a belief, never a fact. Also, economists will consider your beliefs to be updatable. That is, your belief of the other person’s choice may change over time. In fact, if you did choose scissors, but the other person chose rock, then you just lost that round. What if they said “best of three.” Then you go again and repeat the game. But this time, you may think that because you just played scissors, they will think “surely they (you) wouldn’t go for scissors again!” and since you think they would say such a thing, then you decide to play scissors again. Suppose the other person knows you well and is sure that you will have this exact thinking process. Then they might play rock again. Now, what if you also knew them well? This back-and-forth reasoning is a defining feature in sequential games or repeated games

Now that I have explained how I see the world around me, why is this useful? Game Theory explains a lot of our interactions in a basic way. It can explain why some couples argue differently than others. Sometimes a couple will use a tit-for-tat strategy where, if you say something hurtful to me, I will say something hurtful back to you and so on. Or it may be a tit-for-two-tats where, if you say something hurtful to me, I will ignore it. If you say something hurtful again, I will unleash hell onto you and bring up the time you forgot my birthday!

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Alternatively, if you just turned 18, unexpectedly got pregnant, and you want to phone your mother to tell her, but she doesn’t know. Then perhaps you will adopt a specific strategy (sequence of actions) that will minimize the possibility of an adverse reaction from your mother. For instance, you may simultaneously announce your pregnancy and the marriage proposal from your romantic partner, who wishes to bring up the child with you. Your mother might not be as upset as if you had only announced the pregnancy. Thanks to your strategy, your mom is now compassionate and understanding, which makes everyone better off. To you, dear readers, what was a strategy that you recently used to minimize negative results?

I thank you infinitely for reading this post and if you would like to know more about the mysteries that surround us, please join my subscription list to keep up with my newest content. If you have any questions, please add them to the comment section and I’ll make sure to answer as soon as humanly possible.

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Bring Up Flowers—How do these beautiful blossoms emerge

It is now mid-April; we are well into Spring at this point. Looking outside, I am completely astonished by the beautiful and ostentatious colours displayed by the flowers peeking through the ground. Also, I cannot overlook the smell; it is truly incredible. Nature has finally come back to life. Even though I will have to wait until well over mid-May for the first sign of leaves in the tree, I can momentarily rejoice in the early present that Mother Nature is giving us.

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Flowers, peeking through the soil, seem to exist as both fragile and tenacious entities. Although we could not see them for most of Fall and the entire Winter, parts of them have survived. The surviving part will, yet, vary depending on the kind of plant they are. Annuals will die every year but will leave behind their fertilized seeds to replant and grow sprouts. As for perennials, when freezing hits, some of their parts will begin a decaying process, yet their root network will survive even through the harshest of times. As soon as the warmth—typically brought by Spring—makes its first appearance, the roots will awaken and contribute to the renewal of all lost parts.

Thinking about flowers, often enough, evokes the image of gardens in our mind. They are so glorious that it is not surprising at all to have people willing to spend good money just for their mere sight. Two options lay in front of us to gain access to such treats. We could opt to build a personal garden, our very own little piece of paradise, or we could easily book a visit to our local botanical garden. If you decide to proceed in creating your very own tiny patch, you’ll certainly have to spend a lot of elbow grease to structure it. Yet, there are no set rules which define the perfect constitution of a garden. Still, with some advice, we can certainly create a fair-looking one.

If there is one thing you must keep in mind when dealing with flowers is the advantages offered by each of the two kinds presented before, perennials and annuals. To avoid headaches, use both: it will cut down planting time while maximizing blossoming time. Perennials will not need replanting every year. However, you will have to exert patience before seeing the fruit of all your labour. Perennials are reputed to take up to three years to reach their full potential. You will also have to remember after a few years to divide the plant. Failure to split the plants often enough could cause their flowers to acquire a dull colouring, parts could stop flowering entirely (especially at their centre), and they could also outgrow their designated spot. Spring is typically the preferred time to do the maintenance, but if you could not complete it within that period, you can still proceed to divide them safely at any other time. They are, decidedly, gifts that keep on giving.

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As for annual flowers, they are quite interesting too. They, indeed, sadly require more effort to implement in our gardens, but they have honestly no parallel in terms of either blooming period or colourfulness. If you decide to make your garden entirely out of annual flowers, it would surely be a sight for sore eyes. However, that decision would imply that the work would need to be totally redone from scratch every year. The work that it involves would be, for me at least, an insufferable burden. The solution resides in supplementation. Have beautiful perennials that keep on coming back and, every Spring, invest in some extra annuals. This alternative will not only save your hand from being overtaxed, but it will also cause your eyes to be thoroughly delighted.

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While building our next garden, we will also need to consider different combinations of colours, sizes, and shapes. Clearly, placing the small plants far behind should be avoided. They then risk being hidden by other larger plants. We need to put the smaller plants at the forefront, where we can see them. It is also worth noting that accessibility is also important. We want all of your annuals to have an easily accessible spot where we can replant them every year. As for the colours, we can explore different colour schemes. It really does not matter how many colours we want to include: let us only make sure that the combination makes sense (do they actually work well together?) The shapes of the petals and the flowers could also benefit from our attention. Aside from tulip gardens, having the same flowers repeated can be pretty dull. That’s why varying them can be a good idea. They, additionally, don’t blossom simultaneously, which would provide you with a colourful garden for much longer.

Despite the apparent appeal of having a pleasant and attractive garden, varying the sort of plants to be used is also a good idea to encourage and support diverse pollinators. The great majority of pollinators are flying insects such as bees, wasps, beetles, butterflies, moths and flies. The bees, which are famously renowned for their currently alarming decline, require our assistance. Their main sustenance is the honey produced from their collected pollen. The flowers are providing the bees with this pollen. Usually, pollen serves to produce male gametes (male sperms). Increasing pollen supplies for the bee is a good start in a way to help them.

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We can find the pollen on the anther at the filaments’ tip. Both, the stamen and the filaments, form what we call the stamen. The filaments are thin cylindrical structures popping out of the centre of the flower. Aside from the filaments, flowers have many other parts. They have a stem that serves as a support for both their leaves and the flower itself. They also possess numerous leaves that will provide energy for the plant through photosynthesis. The pistil, found at the very centre of the flower, will collect pollen for the prospective fertilization of the ovules residing inside it. Lastly, the petals will provide protection for the reproductive organs. They will also serve to repel or even attract particular pollinators.

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When gazing upon a garden that has been carefully conceived to all of its subtlest detail, it is of no wonder that one must be marvelled. Yet, it is equally, or even more, fascinating to observe a random patch of flower composite in the forest or on the side of the road. Nature has a marvellous taste in design when it comes to arranging her decor. Every summer, during my regular hikes, I become incredibly aware of the inner beauty of the nature surrounding us.

My favourite kinds are flowers with small petals and vivid colours. Still, I cannot ignore the appeal of all the others. The first flower that caught my breath was the lilac. This perennial was a flower that was introduced to me by a long-time admirer, my mother. She loves them so much that she bought two lilacs to plant around our courtyard. When they became big enough, we could enjoy both the colours and the odours they were presenting. A second flower that I particularly love is the violet. I remember finding one of them piercing through the asphalt (bitumen) on the side of the road, and I could not stop pondering about their strength. Lastly, I included bleeding hearts on my list. These are the most recent flowers I encountered and instantly charmed me. From my mother-in-law’s garden, I caught myself gazing at those flowers and thinking about how they reminded me of both protection and love.

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I thank you infinitely for reading this post and if you would like to know more about the mysteries that surround us, please join my subscription list to keep up with my newest content. If you have any questions, please add them to the comment section and I’ll make sure to answer as soon as humanly possible.

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