Academic journal article International Advances in Economic Research

The Economics of Control: An Application

Academic journal article International Advances in Economic Research

The Economics of Control: An Application

Article excerpt

This study revisits utility theory and applies standard consumer theory to the choice between two 'goods,' money and the freedom to control one's own life. The freedom to control one's own life is an intangible, but very real asset, which we assume enhances an individual's well being. Money is a tangible asset that is related to an individual's initial wealth endowment as well as current income. An individual strives to maximize his or her total utility based on the available combinations of personal freedom and the consumption of goods and services as determined by one's monetary resources. An increase in either monetary assets or personal freedom will increase the overall utility level.

In our research, we develop a theoretical framework as the basis for interpersonal transactions that involve a tradeoff between money and personal control. The model can be used to explore employee and employer transactions, bribery, or personal relationships, such as a loveless marriage where one spouse supports the other.

People face situations in which they can enter into an arrangement with another individual that involves a trade between money and control. The use of standard utility theory in an Edgeworth Box framework illustrates a two-person, pure-exchange economy where money and personal control are exchanged. …

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