= 27d567bc2d48d9f40e9ccc20ea370b15)
RobinZ comments on The Math of When to Self-Improve - Less Wrong
You are viewing a comment permalink. View the original post to see all comments and the full post content.
= 783df68a0f980790206b9ea87794c5b6)
Loading…= b715d02e85f7b3b4ae65ca3d3e450868)
Subscribe to RSS Feed
Powered by Reddit
= f037147d6e6c911a85753b9abdedda8d)
You are viewing a comment permalink. View the original post to see all comments and the full post content.
Comments (69)
Sorry, the concrete example. Take
and point future income functions
which (using the Dirac delta function) correspond to instantaneous incomes at times t = 10 and 20. That is, 2010 and 2020.
Using these functions,
and
Note that to find (say) the value of F_2 in 2010, you would write
which is not equal to P(F_1).
The OP gives two examples of market pricing - the market price for a website, and a perhaps more subjective price of acquiring a marketable skill set. The question of how to value cashflows to determine a market price has been pretty well studied. The fundamental theorem of arbitrage-free pricing basically boils down to saying that to avoid arbitrage possibilities in pricing, risk-adjusted cashflows must be discounted at a risk-free rate.
The scope of this theorem is continuously traded securities; it seems reasonable to apply inductive logic to extend this result to any commodity well modeled by a Walrasian auction. This would include, I think, a marketable skill set.
When the OP talks about 'my discount rate', he must be referring to his personal preferences - i.e., his utility function.
I don't know much economics, but I think the point I was making was that other utility functions were possible. I don't have any comment on pricing risk.