Escaping Your Past

24 Z_M_Davis 22 April 2009 09:15PM

Followup to: Sunk Cost Fallacy

Related to: Rebelling Against NatureShut Up and Do the Impossible!

(expanded from my comment)

"The world is weary of the past—
O might it die or rest at last!"
— Percy Bysshe Shelley, from "Hellas"

Probability theory and decision theory push us in opposite directions. Induction demands that you cannot forget your past; the sunk cost fallacy demands that you must. Let me explain.

An important part of epistemic rationality is learning to be at home in a material universe. You are not a magical fount of originality and free will; you are a physical system: the same laws that bind the planets in their orbits, also bind you; the same sorts of regularities in these laws that govern the lives of rabbits or aphids, also govern human societies. Indeed, in the last analysis, free will as traditionally conceived is but a confusion—and bind and govern are misleading metaphors at best: what is bound as by ropes can be unbound with, say, a good knife; what is "bound" by "nature"—well, I can hardly finish the sentence, the phrasing being so absurd!

Epistemic rationality alone might be well enough for those of us who simply love truth (who love truthseeking, I mean; the truth itself is usually an abomination), but some of my friends tell me there should be some sort of payoff for all this work of inference. And indeed, there should be: if you know how something works, you might be able to make it work better. Enter intrumental rationality, the art of doing better. We all want to better, and we all believe that we can do better...

But we should also all know that beliefs require evidence.

Suppose you're an employer interviewing a jobseeker for a position you have open. Examining the jobseeker's application, you see that she was expelled from four schools, was fired from her last three jobs, and was convicted of two felonies. You ask, "Given your record, I regret having let you enter the building. Why on Earth should I hire you?"

And the jobseeker replies, "But all those transgressions are in the past. Sunk costs can't play into my decision theory—it would hardly be helping for me to go sulk in a gutter somewhere. I can only seek to maximize expected utility now, and right now that means working ever so hard for you, O dearest future boss! Tsuyoku naritai!"

And you say, "Why should I believe you?"

And then—oh, wait. Just a moment, I've gotten my notes mixed up—oh, dear. I've been telling this scenario all wrong. You're not the employer. You're the jobseeker.

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Sunk Cost Fallacy

30 Z_M_Davis 12 April 2009 05:30PM

Related to: Just Lose Hope Already, The Allais Paradox, Cached Selves

In economics we have this concept of sunk costs, referring to costs that have already been incurred, but which cannot be recouped. Sunk cost fallacy refers to the fallacy of honoring sunk costs, which decision-theoretically should just be ignored. The canonical example goes something like this: you have purchased a nonrefundable movie ticket in advance. (For the nitpickers in the audience, I will also specify that the ticket is nontransferable and that you weren't planning on meeting anyone.) When the night of the show comes, you notice that you don't actually feel like going out, and would actually enjoy yourself more at home. Do you go to the movie anyway?

A lot of people say yes, to avoid wasting the ticket. But on further consideration, it would seem that these people are simply getting it wrong. The ticket is a sunk cost: it's already paid for, and you can't do anything with it but go to the movie. But we've stipulated that you don't want to go to the movie. The theater owners don't care whether you go; they already have their money. The other theater-goers, insofar as they can be said to have a preference, would actually rather you stayed home, making the theater marginally less crowded. If you go to the movie to satisfy your intuition about not wasting the ticket, you're not actually helping anyone. Of course, you're entitled to your values, if not your belief. If you really do place terminal value on using something because you've paid for it, well, fine, I guess. But we should all try to notice exactly what it is we're doing, in case it turns out to not be what we want. Please, think it through.

Dearest reader, if you're now about to scrap your intuition against wasting things, I implore you: don't! The moral of the parable of the movie ticket is not that waste is okay; it's that you should implement your waste-reduction interventions at a time when they can actually help. If you can anticipate your enthusiasm waning on the night of the show, don't purchase the nonrefundable ticket in the first place!

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It's the Same Five Dollars!

23 Z_M_Davis 08 March 2009 07:23AM

From Tversky and Khaneman's "The Framing of Decisions and the Psychology of Choice" (Science, Vol. 211, No. 4481, 1981):

The following problem [...] illustrates the effect of embedding an option in different accounts. Two versions of this problem were presented to different groups of subjects. One group (N = 93) was given the values that appear in parentheses, and the other group (N = 88) the values shown in brackets.

[...] Imagine that you are about to purchase a jacket for ($125) [$15], and a calculator for ($15) [$125]. The calculator salesman informs you that the calculator you wish to buy is on sale for ($10) [$120] at the other branch of the store, located 20 minutes drive away. Would you make the trip to the other store?

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