This post examines an attempt by professional decision theorists to treat an example of time inconsistency, and asks why they failed to reach the solution (i.e., TDT/UDT) that this community has more or less converged upon. (Another aim is to introduce this example, which some of us may not be familiar with.) Before I begin, I should note that I don't think "people are crazy, the world is mad" (as Eliezer puts it) is a good explanation. Maybe people are crazy, but unless we can understand how and why people are crazy (or to put it more diplomatically, "make mistakes"), how can we know that we're not being crazy in the same way or making the same kind of mistakes?

The problem of the ‘‘absent-minded driver’’ was introduced by Michele Piccione and Ariel Rubinstein in their 1997 paper "On the Interpretation of Decision Problems with Imperfect Recall". But I'm going to use "The Absent-Minded Driver" by Robert J. Aumann, Sergiu Hart, and Motty Perry instead, since it's shorter and more straightforward. (Notice that the authors of this paper worked for a place called Center for the Study of Rationality, and one of them won a Nobel Prize in Economics for his work on game theory. I really don't think we want to call these people "crazy".)

Here's the problem description:

An absent-minded driver starts driving at START in Figure 1. At X he
can either EXIT and get to A (for a payoff of 0) or CONTINUE to Y. At Y he
can either EXIT and get to B (payoff 4), or CONTINUE to C (payoff 1). The
essential assumption is that he cannot distinguish between intersections X
and Y, and cannot remember whether he has already gone through one of
them.