Intransitive preferences are a demonstrable characteristic of human behaviour. So why am I having such trouble coming up with real-world examples of money-pumping?
"Because I'm not smart or imaginative enough" is a perfectly plausible answer, but I've been mulling this one over on-and-off for a few months now, and I haven't come up with a single example that really captures what I consider to be the salient features of the scenario: a tangled hierarchy of preferences, and exploitation of that tangled hierarchy by an agent who cyclically trades the objects in that hierarchy, generating trade surplus on each transaction.
It's possible that I am in fact thinking about money-pumping all wrong. All the nearly-but-not-quite examples I came up with (amongst which were bank overdraft fees, Weight Watchers, and exploitation of addiction) had the characteristics of looking like swindles or the result of personal failings, but from the inside, money-pumping must presumably feel like a series of gratifying transactions. We would want any cases of money-pumping we were vulnerable to.
At the moment, I have the following hypotheses for the poverty of real-world money-pumping cases:
- Money-pumping is prohibitively difficult. The conditions that need to be met are too specific for an exploitative agent to find and abuse.
- Money-pumping is possible, but the gains on each transaction are generally so small as to not be worth it.
- Humans have faculties for identifying certain classes of strategy that exploit the limits of their rationality, and we tell any would-be money-pumper to piss right off, much like Pascal's Mugger. It may be possible to money-pump wasps or horses or something.
- Humans have some other rationality boundary that makes them too stupid to be money-pumped, to the same effect as #3.
- Money-pumping is prevalent in reality, but is not obvious because money-pumping agents generate their surplus in non-pecuniary abstract forms, such as labour, time, affection, attention, status, etc.
- Money-pumping is prevalent in reality, but obfuscated by cognitive dissonance. We rationalise equivalent objects in a tangled preference hierarchy as being different.
- Money-pumping is prevalent in reality, but obscured by cognitive phenomena such as time-preference and discounting, or underlying human aesthetic/moral tastes, (parochial equivalents of pebble-sorting), which humans convince themselves are Real Things that are Really Real, to the same effect as #6.
Does anyone have anything to add, or any good/arguable cases of real-world money-pumping?
Very interesting! I actually started having similar thoughts about money pumps and utility functions after learning Haskell. Specifically, that you can avoid the intransitivity -> money-pumpable implication if you just assume (quite reasonably) that humans' utility functions are lazily evaluated and have side effects (i.e. are impure functions).
In other words, humans don't instantly know the implication of their utility function for every possible decision (which would imply logical omniscience), but rather, evaluate it only as the need arises; and once they evaluate it for a given input, the function can change because it was so evaluated so that it has a different I/O mapping on future evaluations (the impure part).
EY has actually said as much about morality and human values, but used the term abstract idealized dynamic.
Anyone know how badly (or if at all) the standard implications of the VNM utility axioms break down if you take away the requirement that the utility function must be strictly evaluated and pure?
Edit: Do you have a cite for that quote? I google it and only get your post.
Beckstead's dissertation isn't online yet, and he asked me not to upload it.
Thanks for sharing the connections between human utility functions and programming functions.
Other works on that subject are Muehlhauser (2012) and Nielsen & Jensen (2004), both of which I cited in IEME, and also Srivastava & Schrater (2012), which was recently brought to my attention by Jacob Steinhardt.