Ok, I had never seen it simplified like that though, and definitely wasn't aware that from a random coin you can be net positive if you cooperate, that's a surprise to my knowledge and I find that idea very valuable.
Edit: also I don't see it very similar to insurance, since insurance is withholding wealth in order to distribute it occasionally when needed because it's zero-sum. But if distributing it all the time everywhere is a net positive gain, that's entirely different than the insurance game.
> also I don't see it very similar to insurance, since insurance is withholding wealth in order to distribute it occasionally when needed because it's zero-sum. But if distributing it all the time everywhere is a net positive gain, that's entirely different than the insurance game.
Insurance is zero-sum (negative-sum, actually) when it comes to money. It is not zero-sum overall, because reducing risk is valuable. A 50/50 shot at either 10 million dollars or nothing is significantly less valuable (to anyone who isn't already very rich) than a guaranteed 5 million.
Yes, but even homo Economicus isn't trying to maximize expected income, they're trying to maximize expected utility. Unless you're completely indifferent to risk, the sure thing is better.
Indifferent to risk, or seeking of risk, or having any other computable utility function on any other measurable that we’d have to accept as equally valid if we want to convince any non-economist that we aren’t just using utility as a weasely word for money :)
That’s not even snark, humans preferring both of higher risk and lower payoff is a canonical psycho-economic result. And even the question of whether the concept of a rational utility maximizer is well-founded is the exact subject of this very fine article!
Sure. I very much doubt anyone seeks risk because it's risk. They do it for the thrill, or for social reasons, or because calculating risk is hard, etc.
> having any other computable utility function on any other measurable that we’d have to accept as equally valid if we want to convince any non-economist that we aren’t just using utility as a weasely word for money
Almost anything else will do just as well. If you can buy it (or the means to acquire it) on the market, then there's always some point at which twice as much money buys less than twice as much. Maybe 10 million is not enough to hit that point, or 5 million is too much, but the curve flattens out somewhere. And if you can't, then the money makes no direct difference, but can still buy you food and shelter and free time with which to pursue your other projects.
I suppose in principle you could actively want to not have money (and not want to give it away either), in which case getting rid of 10 million is probably not twice as hard as getting rid of 5, but that hardly seems realistic.
Most first world governments "fine" you quite a lot of money if you work on risky things. For example, if you earn $100,000 for ten years, vs $1,000,000 on one of those random years, after taxes you would have $720,000 vs $520,000 if you lived in San Francisco.
I don't think this is right at all? I think it's backwards... If the $1M is a capital gain from an investment you made multiple years ago - which is what windfalls from "work on risky things" actually look like - it will be taxed less than ten years of $100k of income.
I think you're right if you're thinking about lottery winnings or other kinds of non-capital-gain windfalls like a gift from a benefactor, but those aren't the result of valuable "work on risky things".
Edit: also I don't see it very similar to insurance, since insurance is withholding wealth in order to distribute it occasionally when needed because it's zero-sum. But if distributing it all the time everywhere is a net positive gain, that's entirely different than the insurance game.