tag:blogger.com,1999:blog-544041532485510036.post1122015976589569570..comments2023-10-05T05:19:54.721-07:00Comments on too little, too late: prospect theoryWolfganghttp://www.blogger.com/profile/07086991199438418163noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-544041532485510036.post-17657644867589733172017-02-19T16:25:57.229-08:002017-02-19T16:25:57.229-08:00>> I think our biases and so-called fallaci...>> I think our biases and so-called fallacies have two origins, <br /><br />I'm pretty sure they only have one origin and that's our evolutionary heritage as you stated. I'm not sure what you were trying to get at with your second origin idea, but if your idea is valid it's a consequence of our evolutionary heritage and not an origin in itself.<br /><br />Btw, I read a book recently that I think there is some chance you would enjoy if you haven't already read it. It's entitled "The Vital Question" by Nick Lane. Link is below. Maybe getting your mind off of politics for a few hours would be a good thing. <br /><br />https://www.amazon.com/Vital-Question-Evolution-Origins-Complex/dp/0393352978/ref=sr_1_1?s=books&ie=UTF8&qid=1487550183&sr=1-1&keywords=nick+lane<br /><br />Leenoreply@blogger.comtag:blogger.com,1999:blog-544041532485510036.post-56733210675771486152017-02-19T12:52:45.928-08:002017-02-19T12:52:45.928-08:00>> that they were developed by our evolutio...>> that they were developed by our evolution<br />Kahneman has one that you may appreciate: <br />Something that an animal sees for the first time could be dangerous, something else that has been encountered many times (and survived) is probably harmless.<br /><br />This explains, according to Kahneman, why a new idea, word, image, etc. is initially met with skepticism and even fear. But we get used to something that is repeated over and over perhpas even by different sources. <br />So if e.g. Trump and friends keep repeating the same idea over and over (tariffs will bring jobs to US) enough people will get used to it over time and no longer be afraid of it.wolfgangnoreply@blogger.comtag:blogger.com,1999:blog-544041532485510036.post-79286839277016126032017-02-19T12:37:41.001-08:002017-02-19T12:37:41.001-08:00I think our biases and so-called fallacies have tw...I think our biases and so-called fallacies have two origins, the big one being the fact that they were developed by our evolution in a highly uncertain and undependable world which leads us to heavily discount the future. Three year-olds are well aware that they have no power to enforce their contracts, while big banks know that they have a more or less dependable leviathan to do the dirty work.<br /><br />You point out the other one, which is not unconnected. It's a bother and computational nuisance to keep track of whom owes you an extra dollar, but Lee, anyway, will do the work for $52.<br /><br />Many of these so-called fallacies stem from assuming that linearity applies in a domain where there is no reason to expect it.CapitalistImperialistPighttps://www.blogger.com/profile/17523405806602731435noreply@blogger.comtag:blogger.com,1999:blog-544041532485510036.post-3983750426782993722017-02-19T10:03:14.250-08:002017-02-19T10:03:14.250-08:00>> Don't get me wrong, I think experimen...>> Don't get me wrong, I think experiments uncovering bias and fallacies are interesting and one should know about them. <br /><br />I agree, but I think Kahneman points out somewhere in the book that knowing about them doesn't really change much, if anything, in the way we respond to different situations.<br /><br /> Leenoreply@blogger.comtag:blogger.com,1999:blog-544041532485510036.post-29611428845147807342017-02-18T19:20:27.981-08:002017-02-18T19:20:27.981-08:00Obviously any rational human being would take the ...Obviously any rational human being would take the higher short term return, but I've known for a long time I'm not rational. 8-) <br /><br />When I wrote that I'm risk adverse, I think that is true. But in this case I don't think that is what would guide my actions. I think it would be more along the lines of not caring much about maximizing my wealth, but caring quite a bit about minimizing annoyances. Having to go back in a week or even to just wait a week to collect an extra dollar is an annoyance. Having to go back in a year, is an annoyance that is put off and I'm going to get $52 instead of $1. I'll probably just lose the dollar out of my pocket while I might buy a book or two with the $52. That is actually true. That is how my brain works when it comes to thinking about money. For me that's true for even quite large amounts of money. I'll just let an investment sit at a low return even if I can get a guaranteed higher return just because I don't want the annoyance of fooling with it. So I guess markets are generally efficient, but if I'm at all representative of a population it's not because of rational thinking.Leenoreply@blogger.comtag:blogger.com,1999:blog-544041532485510036.post-35693078230980978862017-02-18T18:41:15.058-08:002017-02-18T18:41:15.058-08:00Interesting example of an inverted yield curve: Yo...Interesting example of an inverted yield curve: You would accept a 52% ann. return for a 1 year investment but reject 67% for the very short term.<br />8-)wolfgangnoreply@blogger.comtag:blogger.com,1999:blog-544041532485510036.post-69397202622599553532017-02-18T14:29:25.132-08:002017-02-18T14:29:25.132-08:00I'm risk adverse. I'd take $100 now. How...I'm risk adverse. I'd take $100 now. However, I'd wait a year to take $152.Leenoreply@blogger.comtag:blogger.com,1999:blog-544041532485510036.post-16210944603474290162017-02-18T10:48:10.255-08:002017-02-18T10:48:10.255-08:00The 100$ now.The 100$ now.Anonymousnoreply@blogger.com