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The quiz Daniel Kahneman wants you to fail

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Re: The quiz Daniel Kahneman wants you to fail

#41

Post by X-Istence »

2arrs2ells wrote: post #27
colanderman wrote: post #23

The questions involving "90% chance of $1000 or 100% chance of $900" always bother me. I never understand why economists think that a rational actor would consider them equivalent; they're not , unless you are making that choice many many times. But if I'm given that chance once (which is presumably what most participants assume, since that's not a choice that comes up often in one's life), it's really then a choice…

The interesting thing is not that people are risk averse (and thus choose 100% chance of $900), the interesting thing is that people become risk seeking when it comes to losses (and thus choose 90% chance of -$1000). You're creating a bit of a straw man when it comes to behavioral economists and their view of "rational actors" - the whole field is built around the understanding that there is more to economic decision…

Yes, however there is a slight chance of winning the odds and not paying anything. The risk is minimal. If the numbers were further apart I don't think the same logic would kick in.

A = $900 lost B = $9000 lost with a 90% chance

Those are odds I wouldn't want to try. I would take the instant loss knowing that my odds are just not good enough to win if I were to choose B.

Re: The quiz Daniel Kahneman wants you to fail

#42

Post by HarrietTubgirl »

colanderman wrote: post #23

The questions involving "90% chance of $1000 or 100% chance of $900" always bother me. I never understand why economists think that a rational actor would consider them equivalent; they're not , unless you are making that choice many many times. But if I'm given that chance once (which is presumably what most participants assume, since that's not a choice that comes up often in one's life), it's really then a choice…

"In their right mind" or "reasonable" is not what "rational" means in discussions of economics. There also isn't as much of an implication of rational=good and irrational=bad.

Re: The quiz Daniel Kahneman wants you to fail

#43

Post by anothermachine »

X-Istence wrote: post #41
2arrs2ells wrote: post #27

Earlier quoted context omitted.

The interesting thing is not that people are risk averse (and thus choose 100% chance of $900), the interesting thing is that people become risk seeking when it comes to losses (and thus choose 90% chance of -$1000). You're creating a bit of a straw man when it comes to behavioral economists and their view of "rational actors" - the whole field is built around the understanding that there is more to economic decision…

Yes, however there is a slight chance of winning the odds and not paying anything. The risk is minimal. If the numbers were further apart I don't think the same logic would kick in. A = $900 lost B = $9000 lost with a 90% chance Those are odds I wouldn't want to try. I would take the instant loss knowing that my odds are just not good enough to win if I were to choose B.

you mean 10% chance, right?

Re: The quiz Daniel Kahneman wants you to fail

#44

Post by neonkiwi »

X-Istence wrote: post #41
2arrs2ells wrote: post #27

Earlier quoted context omitted.

The interesting thing is not that people are risk averse (and thus choose 100% chance of $900), the interesting thing is that people become risk seeking when it comes to losses (and thus choose 90% chance of -$1000). You're creating a bit of a straw man when it comes to behavioral economists and their view of "rational actors" - the whole field is built around the understanding that there is more to economic decision…

Yes, however there is a slight chance of winning the odds and not paying anything. The risk is minimal. If the numbers were further apart I don't think the same logic would kick in. A = $900 lost B = $9000 lost with a 90% chance Those are odds I wouldn't want to try. I would take the instant loss knowing that my odds are just not good enough to win if I were to choose B.

The reason that $1000 at 90% odds and $900 at 100% odds are used in this example is the expected value is the same in both cases, making the situations 'equivalent'.

A 90% chance of losing $9000 has an expected value of -$8100.

Re: The quiz Daniel Kahneman wants you to fail

#45

Post by diego »

elnerdo wrote: post #28
diego wrote: post #14

Earlier quoted context omitted.

Exactly. Here's the example used in Kahneman's book: "Dick is a 30-year-old man. He is married with no children. A man of high ability and high motivation, he promises to be quite successful in his field. He is well liked by his colleagues. This description was intended to convey no information relevant to the question of whether Dick is an engineer or a lawyer." The description in the quiz is very different.

This still conveys a lot of information. Engineering is more male-heavy than lawyering.

Yes, there's more to it. The experiment was done with 70/30 and 30/70 ratios for different subjects. The book doesn't say whether they specified they were all males, my guess would be that they did.

Re: The quiz Daniel Kahneman wants you to fail

#46

Post by sdoering »

tikhonj wrote: post #33
colanderman wrote: post #23

The questions involving "90% chance of $1000 or 100% chance of $900" always bother me. I never understand why economists think that a rational actor would consider them equivalent; they're not , unless you are making that choice many many times. But if I'm given that chance once (which is presumably what most participants assume, since that's not a choice that comes up often in one's life), it's really then a choice…

My AI professor had a great explanation for this: * lottery B = $900 * lottery A = 0.9 chance of $1000 and 0.1 chance of 0 + feeling stupid.

The feeling stupid part got me here. Aftter that, I understood a little bit more. So thanks for that.

But I really believe, that it comes down to "how often" these chances come in ones life.

It can be seen in the gameshow "Who want's to be a millionaire". In Germany we have a fourth joker: people give up the savety-net at 16.000 for an aditional joker. till now everyone of the winners, who got the million, did not take this option.

16.000 is a lot of money, regarding, that you started with 0. on the other hand 500 (the second level net) is really not so much, when you are hanging at 125.000 and having to take a shot at the million. and falling down to 500 feels a lot more stupid. so people become risk adverse (risk of loosing a lot and feeling stupid) a lot faster and don't trust their answer when gambling for that million.

Re: The quiz Daniel Kahneman wants you to fail

#47

Post by anothermachine »

2arrs2ells wrote: post #27
colanderman wrote: post #23

The questions involving "90% chance of $1000 or 100% chance of $900" always bother me. I never understand why economists think that a rational actor would consider them equivalent; they're not , unless you are making that choice many many times. But if I'm given that chance once (which is presumably what most participants assume, since that's not a choice that comes up often in one's life), it's really then a choice…

The interesting thing is not that people are risk averse (and thus choose 100% chance of $900), the interesting thing is that people become risk seeking when it comes to losses (and thus choose 90% chance of -$1000). You're creating a bit of a straw man when it comes to behavioral economists and their view of "rational actors" - the whole field is built around the understanding that there is more to economic decision…

That's because Kahneman gets the signs wrong in the OP.

Question 5a is: $900 @ 100%, or $1000 @ 90%

Most people choose $900 @ 100%

Question 5b is: -$1000 + $100 @ 100%, or -$1000 + $1000 @ 10%

Most people choose -$1000 + $1000 @ 10%

Written this way, the false symmetry vanishes, and we see that in both cases, people are risk averse when the payoff is low, and risk-seeking when the payoff is high. Which is to say, people value life-changing sums super-linearly as compared to insignificant sums.

Re: The quiz Daniel Kahneman wants you to fail

#48

Post by chrischen »

yariang wrote: post #16
Vivtek wrote: post #9

I didn't much like this: " being swayed by the way in which questions are worded rather than responding just to their substance " (for the lost ticket being allegedly equivalent to $10). Is a ticket, which costs $10, emotionally equivalent to $10? Once bought, the ticket is unique in my eyes, whereas I'm not even sure how many $10 bills I have in my wallet even now. So if I lose one, well, maybe it wasn't there in th…

I would dare say unless you're rational, not necessarily an economist. Most of us are not rational all the time, and the whole point of the question is to show an instance where we are not. You would be correct if there were not other tickets available; in that case, the ticket truly is unique. But in the example given you could acquire another one. In that case the ticket is not unique and is equivalent to the cost…

But I believe it is the duty of the ticket vendor to keep track of who bought tickets. In protest, I would not replace a ticket if I lost it, but if I lost $10 it is completely my responsibility. Is this not rational if I believe I can affect change through the action?

Re: The quiz Daniel Kahneman wants you to fail

#49

Post by [deleted] »

colanderman wrote: post #23

The questions involving "90% chance of $1000 or 100% chance of $900" always bother me. I never understand why economists think that a rational actor would consider them equivalent; they're not , unless you are making that choice many many times. But if I'm given that chance once (which is presumably what most participants assume, since that's not a choice that comes up often in one's life), it's really then a choice…

[deleted]

Re: The quiz Daniel Kahneman wants you to fail

#50

Post by jfoutz »

diego wrote: post #45
elnerdo wrote: post #28

Earlier quoted context omitted.

This still conveys a lot of information. Engineering is more male-heavy than lawyering.

Yes, there's more to it. The experiment was done with 70/30 and 30/70 ratios for different subjects. The book doesn't say whether they specified they were all males, my guess would be that they did.

a frequentist would take issue with the two sons, one born on a tuesday problem. you can actually count up the permutations.

let's say we have 10 engineers, 9 of them are male. we also have 10 lawyers, 6 of them are male. Let's say one in 10 people likes doing math on the weekend.

There are 90 out of 100 ways to have a group of male engineers, one of which who likes math, but only 60 out of 100 ways to do the same with a male lawyer. furthermore, if we add in the four kids as another 1 in 10 thing, the situation gets even worse. This isn't bayesian, this is just counting boxes on a permutation table.

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