A lot of rationalist thinking about ethics and economy assumes we have very well defined utility functions - knowing exactly our preferences between states and events, not only being able to compare them (I prefer X to Y), but assigning precise numbers to every combinations of them (p% chance of X equals q% chance of Y). Because everyone wants more money, you should theoretically even be able to assign exact numerical values to positive outcomes in your life.
I did a small experiment of making a list of things I wanted, and giving them point value. I must say this experiment ended up in a failure - thinking "If I had X, would I take Y instead", and "If I had Y, would I take X instead" very often resulted in a pair of "No"s. Even thinking about multiple Xs/Ys for one Y/X usually led me to deciding they're really incomparable. Outcomes related to similar subject were relatively comparable, those in different areas in life were usually not.
I finally decided on some vague numbers and evaluated the results two months later. My success on some fields was really big, on other fields not at all, and the only thing that was clear was that numbers I assigned were completely wrong.
This leads me to two possible conclusions:
- I don't know how to draw utility functions, but they are a good model of my preferences, and I could learn how to do it.
- Utility functions are really bad match for human preferences, and one of the major premises we accept is wrong.
Anybody else tried assigning numeric values to different outcomes outside very narrow subject matter? Have you succeeded and want to share some pointers? Or failed and want to share some thought on that?
I understand that details of many utility functions will be highly personal, but if you can share your successful ones, that would be great.
If you wanted to, we could assess at least a part of your u-curve. That might show you why it isn't an impossibility, and show what it means to test it by intuitions.
Would you, right now, accept a deal with a 50-50 chance of winning $100 versus losing $50?
If you answer yes, then we know something about your u-curve. For example, over a range at least as large as (100, -50), it can be approximated by an exponential curve with a risk tolerance parameter of greater than 100 (if it were less that 100, then you wouldn't accept the above deal).
Here, I have assessed something about your u-curve by asking you a question that it seems fairly easy to answer. That's all I mean by "testing against intuitions." By asking a series of similar questions I can assess your u-curve over whatever range you would like.
You also might want to do calculations: for example, $10K per year forever is worth around $300K or so. Thinking about losing or gaining $10K per year for the rest of your life might be easier than thinking about gaining or losing $200-300K.
I think this greatly oversimplifies the issue. Whatever my response to the query is, it is only an estimation as to my preferences. It also assumes that my predicted risk will, upon the enactment of an actual deal, stay the same; if only for the life of the deal.
A model like this, even if correct for right now, could be significantly different tomorrow or the next day. It could be argued that some risk measurements do not change at intervals so fast as would technically prohibit recalculation. Giving a fixed metric puts absolutes on behaviors which are no... (read more)