Re:Why people make dumb financial decisions on purpose
by hansvm on Sunday September 04, 2022 @12:21PM
(#32714657)
That's an additional concern, but even if you have a flat "utility" scale you can use for comparisons, _expected_ value still isn't necessarily the thing you want to optimize.
Maximizing the min/max outcomes are common alternative preferences. Like, suppose I have a 1% chance of being tortured for a year and a 99% chance at being the next God-Emporer. I can't actually average those futures; I'll be in one or the other, and I might want to have a 0% chance of torture or if the odds are flipped maybe I'm okay with being tortured for the tiny chance at being God-Emporer.
Such preferences are hard to cover under the umbrella of maximizing expected utility because it introduces (neg)infinite utility to certain outcomes. Instead recognizing that you might be optimizing something else is a cleaner way to handle the problem.
Maximizing the min/max outcomes are common alternative preferences. Like, suppose I have a 1% chance of being tortured for a year and a 99% chance at being the next God-Emporer. I can't actually average those futures; I'll be in one or the other, and I might want to have a 0% chance of torture or if the odds are flipped maybe I'm okay with being tortured for the tiny chance at being God-Emporer.
Such preferences are hard to cover under the umbrella of maximizing expected utility because it introduces (neg)infinite utility to certain outcomes. Instead recognizing that you might be optimizing something else is a cleaner way to handle the problem.