Stuart_Armstrong comments on Money pumping: the axiomatic approach - Less Wrong

12 Post author: Stuart_Armstrong 05 November 2009 11:23AM

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Comment author: ChrisHibbert 06 November 2009 06:11:38PM 3 points [-]

Maybe uncertainty makes you nervous, [...]. Then either I'm weakly money pumping you [...], or I'm objectively granting you the removal of your worry as a service. Most people at the time feel that I'm granting them a service, but afterwards they feel I money pumped them. Especially if I repeat it.

Does this mean we should start treating certain types of money pumping as payment for a service rather than something rational agents always avoid?

The name of the service is "insurance". This is a business in which customers repeatedly make bets that they wish they hadn't made in retrospect, but it still makes sense to make the bet ex ante.

Comment author: Stuart_Armstrong 06 November 2009 06:54:45PM 1 point [-]

Actually, for most insurances, it makes no sense to do the bet at any point. Aggregating the risk over your lifetime, you're better off not paying the insurance (this doesn't apply to insurance for major disasters).