In fact, economic theories have been used to describe a whole host of phenomena.Īnd while interesting, we shouldn’t neglect the most important application of economics: studying the economy. However, since one has already qualified for the next tournament, it’s rational for him to lose on purpose to increase the odds that his friend advances.
If you’ve ever read the book Freakonomics (as many millions of people have) then you’ve seen the variety of ways that economics can be applied to situations not directly related to “the economy.”įor example, the book’s authors attempt to explain why sumo wrestlers might cheat by using the economic theory of rational choice, which assumes that each person’s decisions are calculated to produce the best possible outcome.īut why would a sumo wrestler cheat? Imagine that two sumo wrestlers are facing each other in a match.
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