I'm not convinced by expected utility maximization either,
Do you reject the VNM axioms?
I don't see any reason to dispute Axioms 2 (transitivity) and 4 (independence of alternatives), although I know some people dispute Axiom 4.
For Axiom 3 (continuity), I don't have an argument against, but it feels a bit dodgy to me. The lack of inferential distance between the construction of lotteries and the conclusion of the theorem gives me the impression of begging the question. But that isn't my main problem with the axioms.
The sticking point for me is Axiom 1, the totality of the preference relation. Why should an ideal rational agent, whatever that is, have a preference -- even one of indifference -- between every possible pair of alternatives?
"An ideal rational agent, whatever that is." Does the concept of an ideal rational agent make sense, even as an idealisation? An ideal rational agent, as described by the VNM axioms, cannot change its utility function. It cannot change its ultimate priors. These are simply what they are and define that agent. It is logically omniscient and can compute anything computable in constant time. What is this concept useful for?
It's the small world/large world issue again. In small situations, such as industrial process control, that are readily posed as optimisation problems, the VNM axioms are trivially true. This is what gives them their plausibility. In large situations, constructing a universal utility function is as hard a problem as constructing a universal prior.
The sticking point for me is Axiom 1, the totality of the preference relation. Why should an ideal rational agent, whatever that is, have a preference -- even one of indifference -- between every possible pair of alternatives?
How would it act if asked to choose between two options that it does not have a preference between?
An ideal rational agent, as described by the VNM axioms, cannot change its utility function. It cannot change its ultimate priors.
It can, it just would not want to, ceteris paribus.
What is this concept useful for?
It is a start...
This post describes an infinite gamble that, under some reasonable assumptions, will motivate people who act to maximize an unbounded utility function to send me all their money. In other words, if you understand this post and it doesn't motivate you to send me all your money, then you have a bounded utility function, or perhaps even upon reflection you are not choosing your actions to maximize expected utility, or perhaps you found a flaw in this post.
Briefly, we do this with The St. Petersburg Paradox, converted to a mugging along the lines of Pascal's Mugging. I then tweaked it to extract all of the money instead of just a fixed sum.
I have always wondered if any actual payments have resulted from Pascal's Mugging, so I intend to track payments received for this variation. If anyone does have unbounded utility and wants to prove me wrong by sending money, send it with Paypal to tim at fungible dot com. Annotate the transfer with the phrase "St. Petersburg Mugging", and I'll edit this article periodically to say how much money I received. In order to avoid confusing the experiment, and to exercise my spite, I promise I will not spend the money on anything you will find especially valuable. SIAI would be better charity, if you want to do charity, but don't send that money to me.
Here's the hypothetical (that is, false) offer to persons with unbounded utility:
If I am lying and the offer is real, and I am a god, what utility will you receive from sending me a dollar? Well, the probability of me seeing N Tails followed by a Head is (1/2)**(N + 1), and your utility for the resulting universe is UTILITY(UN(N)) >= DUT * 2**N, so your expected utility if I see N tails is (1/2)**(N + 1) * UTILITY(UN(N)) >= (1/2)**(N + 1) * DUT * 2 ** N = DUT/2. There are infinitely many possible values for N, so your total expected utility is positive infinity * DUT/2, which is positive infinity.
I hope we agree that it is unlikely that I am a god, but it's consistent with what you have observed so far, so unless you were born with certain knowledge that I am not a god, you have to assign positive probability to it. Similarly, the probability that I'm lying and the above offer is real is also positive. The product of two positive numbers is positive. Combining this with the result from the previous paragraph, your expected utility from sending me a dollar is infinitely positive.
If you send me one dollar, there will probably be no result. Perhaps I am a god, and the above offer is real, but I didn't do anything beyond flipping the first coin because it came out Tails. In that case, nothing happens. Your expected utility for the next dollar is also infinitely positive, so you should send the next dollar too. By induction you should send me all your dollars.
If you don't send money because you have bounded utility, that's my desired outcome. If you do feel motivated to send me money, well, I suppose I lost the argument. Remember to send all of it, and remember that you can always send me more later.
As of 7 June 2011, nobody has sent me any money for this.
ETA: Some interesting issues keep coming up. I'll put them here to decrease the redundancy: