Something is wrong with Game Theory

When Banana 1 & Banana 2 are faced with 2 choices of strategies with payoff of either (5,5) or (20,10) , What would they choose?

A rational person would say a payoff of (20,10) is better. Why not, since both are better off. However, wealth is relative. I may have a net worth of $100, but it is not an absolute measure unless I know a population of 100 has a net worth of $10 each.

Base on efficiency, (20,10) is good. Base on equity, Banana 1 is twice as rich as Banana 2. So Banana 2 has in fact become poorer.

Wait, we have not accounted the standard of living. Suppose a GDP per capita in a developed country is $10. This means that Banana 1 can afford luxuries better than Banana 2.

In the long run, there will be a huge disparity between the rich and the poor. If the payoff of (20,10) continues, whereby the demand of goods by the rich increases exponentially every year. While the poor demands are constant, thus meaning that overall, prices will increase, doesn't it makes the poor much poorer in real terms?

I'm not an advocate of Karl Marx and socialism. But capitalism and its advocates have clearly stepped outside the boundaries science. It is a social science, not a natural science.

When Black-Scholes created their formula of derivative pricing, it was mathematically flawless, but LTCM still collapsed. It was that they did not take into consideration of the "Arts" of social science.

The recent sub prime is a clear example on how flawed financial models are. Through diversification of mortgages and after securitisation, they become AAA rated. Only through a black swan event did hell broke loose.

Even Warren Buffett, in an article from Bloomberg today, says that looking at the balance sheet wouldn't tell you about Coca-cola. It is the product.

Well, I have deviated from the main subject again...