Perplexed comments on Real-world Newcomb-like Problems - Less Wrong

14 Post author: SilasBarta 25 March 2011 08:44PM

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Comment author: Perplexed 29 March 2011 12:59:45AM *  0 points [-]

The article cited (pdf) purports to derive hyperbolic discounting from a rational analysis.

But it does not do that. Sozou obviously doesn't understand what (irrational) 'time-preference reversal' means. He writes:

I may appear to be temporally inconsistent if, for example, I prefer the promise of a bottle of wine in three months over the promise of a cake in two months, but I prefer a cake immediately over a promise of a bottle of wine in one month.

That is incorrect. What he should have said is: "I am temporally inconsistent if, for example, I prefer the promise of a bottle of wine in three months over the promise of a cake in two months, but two months from now I prefer a cake immediately over a promise of a bottle of wine in one month."

A person whose time preferences predictably change in this way can be money pumped. If he started with a promise of a cake in two months, he would pay to exchange it for a promise of wine in three months. But then two months later, he would pay again to exchange promise of wine in another month for an immediate cake. Edit: Corrected above sentence.

There is nothing irrational in having the probabilities 's' in his Table 1 at a particular point in time (1, 1/2, 1/3, 1/4). What is irrational and constitutes hyperbolic discounting is to still have the same 's' numbers two months later. If the original estimates were rational, then two months later the current 's' schedule for a Bayesian would begin (1, 3/4, 3/5, ...). And the Bayesian would still prefer the promise of wine.

Comment author: timtyler 29 March 2011 08:20:45AM *  0 points [-]

The article cited (pdf) purports to derive hyperbolic discounting from a rational analysis.

But it does not do that. Sozou obviously doesn't understand what (irrational) 'time-preference reversal' means. He writes:

I may appear to be temporally inconsistent if, for example, I prefer the promise of a bottle of wine in three months over the promise of a cake in two months, but I prefer a cake immediately over a promise of a bottle of wine in one month.

That is incorrect. What he should have said is: "I am temporally inconsistent if, for example, I prefer the promise of a bottle of wine in three months over the promise of a cake in two months, but two months from now I prefer a cake immediately over a promise of a bottle of wine in one month."

Uh, no. Sozou is just assuming that all else is equal - i.e. it isn't your birthday, and you have no special preference for cake or wine on any particular date. Your objection is a quibble - not a real criticism. Perhaps try harder for a sympathetic reading. The author did not use the same items with the same temporal spacing just for fun.

People prefer rewards now partly because they know from experience that rewards in the future are more uncertain. Promises by the experimenter that they really really will get paid are treated with scepticism. Subjects are factoring such uncertainty in - and that results in hyperbolic discounting.

It can be seen from the table that a cake immediately is worth more than a promise of wine after a month, while a promise of wine after three months is worth more than a promise of cake after two months. So my preferences are indeed consistent with maximizing my expected reward.

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