2 key concept of Economics

Hi, this is my first post on Medium, so if you are here & reading this — Welcome and Thank you.

Agenda is simple: to put here all that I learnt new in the form of summaries or experiences with a dash of my personal opinions & experiences.

Without further delay, I’ll talk about Game Theory & MAD (Mutually Assured Destruction). Credit to my read today: Finshot’s article.

Theory of Games simply talks about an economical concept wherein two or more parties’ decisions are driven by what the other party thinks/might be thinking, given in a particular situation.

For eg — During tough geopolitical situations between India & Pakistan last year in May–June 2025, the decision of starting a war, deciding on the appropriate retaliation strategy to provide justice over the alleged Pahalgam Attack happened in Kashmir, India, Indian diplomats, government and the authorised people must be wondering what could be the possible response by Pakistan? Should India declare a nuclear war; damage any terrorist base camp; do something similar to aerial strike?

Whereas Pak must be keeping its all armed forces ready to answer back whenever the need arises. Both the parties involved focused on deciding given “what the other party must be thinking to do.”

Along the same lines of instance, let me pick up Nuclear War option to help you understand MAD. If India decided to attack first, Pak would very likely respond back with nuclear weapons. Vice versa would have been the case if Pak chose to go first. The outcome? Both parties had to face the deadly consequences.

Result would be loss of civilians, economic resources, natural resources, economic growth a major hit, and a long‑term or maybe decade‑long consequences to be faced by the nationals of both countries.

This is what Mutually Assured Destruction concept is about. No matter the initiation point but consequences/destruction would be mutual. And Game Theory is simply about making a decision while you consider what other person be thinking to do.

In fact, MAD is often explained using the idea of a Nash equilibrium — a situation where neither side has any incentive to change its strategy, because doing so would only make things worse.