Nick Bostrom wrote:
> Alternatively, we could seek to reinterpret all talk of risk aversion as
> talk about diminishing utility of money. Is there any reason why this would
> not be an attractive option?
I see at least two reasons:
1) In addition to compensating for the diminishing utility of money, there
could be compensation for other factors - for example, a tendency to
overestimate the probability of success in cases where risks are taken. If
this tendency is common enough, there will exist an advantage for risk
aversion in general, even when it contradicts the apparent cognitive model.
2) Regardless of what the rational action is when the results are measured in
"hedons", the de-facto truth that most goods have diminishing marginal utility
may have resulted in a selection pressure for risk aversion, resulting in an
emotional adaptation for risk aversion; which now continues to operate even in
the absence of any rational utility for such an adaptation; and which
economists must therefore assume as a behavioral influence regardless of
whether the resulting behavior is actually rational.
-- -- -- -- --
Eliezer S. Yudkowsky http://singinst.org/
Research Fellow, Singularity Institute for Artificial Intelligence
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