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The infamous coin toss

ergodicityeconomics.com

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Re: The infamous coin toss

#111

Post by Swenrekcah »

LeonB wrote: post #104
Swenrekcah wrote: post #103

Earlier quoted context omitted.

I know VAT is regressive but if it is low enough it doesn't really matter. We do need revenue streams for municipalities and local governments and VAT can be a nice part of that. I would support a low flat income tax for two reasons. It is simple, if all income is taxed at 10% you just pay that and there are no opportunities (or frankly the need) for some fancy loopholes to avoid it. The second reason is that I do li…

I believe you, but it’s just incredibly naive. If “all things were equal” and there were no assumptions and we were all starting at an equal position there “may” be some merit in this position. But that’s just… nothing, absolutely nothing, like where we are. And if it seems like it’s fairly similar to where we are: your education has been very blinkered. I say that with compassion, btw. The scale of current inequalit…

What is naive? I don't quite follow you. Since you're so worldly and educated ;) What would you suggest be done about inequality if not taxation of wealth and stronger representation of the "normal people"?

Re: The infamous coin toss

#113

Post by shove »

LeonB wrote: post #107
shove wrote: post #106

Earlier quoted context omitted.

Marx was specifically talking about industrial production and made that pretty clear in his work. “It’s far too low resolution a phrase” when purposefully taken out of context. If “the means of production” applies to the factory owner and the plumber equally, I’d counter its not at all a useful phrase for “teaching people to hate another group of people” because those aren’t at all the same type of people.

Agreed. I have friends that are plumbers and friends that own factories. Both plumbers and factory owners do indeed have opportunities to exploit people. But my plumber friend can only exploit one customer at a time, where as a factory owner multiplies that ability. Multiplication is a powerful operator.

Of course there’s more ways to cheat people than skimming wages via capitalism. Marx point was that capitalism should be understood as a way to cheat people at scale.

Re: The infamous coin toss

#114

Post by hgsgm »

didgeoridoo wrote: post #5

The +50% / -40% is cleverly chosen, because it seems like the bet is weighted toward the gambler if you’re just using a naïve expected value. However, if you were to make it “double your money” (+100%), it would become clear that the only fair downside would be “halve your money” (-50%). For these values, the “trick” becomes much more obvious: that increases in repeated games need to be far greater in percentage term…

No, the trick is less obvious. It's even more shocking that a hugely higher expectedly value upside (+100% , -60%) ((2x+.4x)/2 = 1.2x) is still losing long-term.

Re: The infamous coin toss

#115

Post by shove »

robertlagrant wrote: post #97
rerdavies wrote: post #64

Huh. So I wrote the code, and ran the simulation. Now I get it. Investors: 100,000 Iterations: 100 Average worth after 100 iterations: $83.923 Average net worth increases. However the distribution of wealth is skewed dramatically. Winners: 13,704 (net worth of more than $1 at the end) Investors worth What That Guy was worth (the investor who made the most money): $1,171,830.00 He flipped 71 heads and 29 tails. Median…

> The only solution: eat the rich. Don't look at history when people did this, though. Just do it based on this simulation.

Nom nom nom

Re: The infamous coin toss

#116

Post by hgsgm »

DarkNova6 wrote: post #63
didgeoridoo wrote: post #5

The +50% / -40% is cleverly chosen, because it seems like the bet is weighted toward the gambler if you’re just using a naïve expected value. However, if you were to make it “double your money” (+100%), it would become clear that the only fair downside would be “halve your money” (-50%). For these values, the “trick” becomes much more obvious: that increases in repeated games need to be far greater in percentage term…

Confusing the equivalence of -50% and +50% is very common. In fact, many video games provide wrong bonuses based on this misunderstanding (Age of Empires 2 being a famous example). Even a simple calculation will show the truth: -40% = 0.6 +50% = 1.5 0.6 * 1.5 = 0.9 Conclusion: With every coin-toss you lose 10% of wealth on average.

Do you bet your entire portfolio every time in AoE2? That's required for those paradox. It doesn't apply when bet size is constant.

Re: The infamous coin toss

#117

Post by hgsgm »

n2d4 wrote: post #67
DarkNova6 wrote: post #63

Earlier quoted context omitted.

Confusing the equivalence of -50% and +50% is very common. In fact, many video games provide wrong bonuses based on this misunderstanding (Age of Empires 2 being a famous example). Even a simple calculation will show the truth: -40% = 0.6 +50% = 1.5 0.6 * 1.5 = 0.9 Conclusion: With every coin-toss you lose 10% of wealth on average.

While I agree, that conclusion is wrong because you forgot to look at the win-win and loss-loss cases. Even with two coin tosses, as in your example, you'll win on average: 1.5 * 1.5 = 2.25 0.6 * 1.5 = 0.9 1.5 * 0.6 = 0.9 0.6 * 0.6 = 0.36 => 1.1025x total It's counter-intuitive because even though you almost always lose, you still win (linear) wealth on average (but not median). The difference is that if you have unl…

Why do you agree with something plainly wrong than you disproved?

Re: The infamous coin toss

#118

Post by svnt »

credit_guy wrote: post #99
rerdavies wrote: post #64

Huh. So I wrote the code, and ran the simulation. Now I get it. Investors: 100,000 Iterations: 100 Average worth after 100 iterations: $83.923 Average net worth increases. However the distribution of wealth is skewed dramatically. Winners: 13,704 (net worth of more than $1 at the end) Investors worth What That Guy was worth (the investor who made the most money): $1,171,830.00 He flipped 71 heads and 29 tails. Median…

> The obvious conclusion: increasing wealth concentration is an unavoidable consequence of capitalism that probably has very little to do with merit. Not really. P implies Q is not the same as Q implies P. The fact that you can get a large gap between rich an poor with pure coin toss does not mean that when you have such a gap the gap resulted from pure randomness. It could have resulted from any combination of merit…

If you change the equation slightly and place a fixed resource consumption requirement (take 1-10% of the initial amount to pay to flip a coin) on each person’s continuation, and then unevenly distribute the initial balance, it will become apparent that your ability to become “that guy” is dominantly determined by your initial balance.

In this version people do not end up at some small fraction of the initial balance but instead they go negative, i.e. exit the simulation to homelessness.

The ability to keep flipping the coin without starving is absolutely the primary determinant.

Re: The infamous coin toss

#119

Post by svnt »

hgsgm wrote: post #117
n2d4 wrote: post #67

Earlier quoted context omitted.

While I agree, that conclusion is wrong because you forgot to look at the win-win and loss-loss cases. Even with two coin tosses, as in your example, you'll win on average: 1.5 * 1.5 = 2.25 0.6 * 1.5 = 0.9 1.5 * 0.6 = 0.9 0.6 * 0.6 = 0.36 => 1.1025x total It's counter-intuitive because even though you almost always lose, you still win (linear) wealth on average (but not median). The difference is that if you have unl…

Why do you agree with something plainly wrong than you disproved?

They are saying parent is correct that plus 50% and minus 50%, while appearing to be balanced, is a losing proposition for the individual.

They are also saying parent is not correct in saying that it also loses on a population basis, showing that the average across a population is still winning.

Re: The infamous coin toss

#120

Post by rocqua »

LeonB wrote: post #98
Swenrekcah wrote: post #92

Earlier quoted context omitted.

>The obvious conclusion: increasing wealth concentration is an unavoidable consequence of capitalism that probably has very little to do with merit. The only solution: eat the rich. This is exactly why we need progressive asset taxes. Income tax should be almost abolished, it can be something like 10% on all types of income and then nobody needs to bother with tax evasions on that. 5-15% VAT or sales tax to generate…

Vat is irredeemably regressive. I suspect you know that. Income tax fails in its progressive goals not because it is inherently bad (like VAT) but because the tax laws are written by the richest players. (Ask a poor person how much influence they’ve had on tax law, and then ask a top 5 accountancy firm. This isn’t a controversial statement.)

I think an ideal system has a marginal tax rate that decreases with income, with an effective tax rate that increases over time.

A simplified version of this:

- two tax brackets, 60% tax over all income below 40 000, 40% tax over all income above 40 000. - A deduction from taxable-income for everyone of about 25 000 - Negative income after deductions means you 'pay negative tax', i.e. you get money from the state - All other subsidies to people come in the form of more deductions from taxable income.

This is effectively a universal basic income of 15 000. It remains a progressive system, and ensures that taxable income deductions are actually valuable to people short on cash.

The numbers obivously need tweaking.

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