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This is interesting. The way I understood the work of von Neumann and Morgenstern on game theory, there is an extensive discussion of utility and the derived o

This is interesting. The way I understood the work of von Neumann and Morgenstern on game theory, there is an extensive discussion of utility and the derived ordering on preferences. I interpret recent work on behavioral economics as building on their work to call into question the claim that one can easily estimate such a utility function for an economic agent in a manner invariant to the internal state of that agent. This train of thought seems like it should leave laissez faire capitalism in the dust.

tr352 6y ago
This is interesting :-) Is there any reasonably accessible literature on this topic, in particular the latter idea of not being able to estimate an agent’s utility function?
- zomglings 6y ago
  I'm not particularly well read in economics, and have not read anything that specifically addresses the difficulty of estimating utility. My view is rather derived from my readings on economics and related fields. The material that stands out the most in my mind are: 1. Von Neumann and Morgenstern's book (particular the sections where they develop the notion of utility) is pretty readable - https://www.goodreads.com/book/show/483055.Theory_of_Games_and_Economic_Behavior https://www.goodreads.com/book/show/483055.Theory_of_Games_a... 2. The Economic Naturalist (https://www.goodreads.com/book/show/629238.The_Economic_Naturalist https://www.goodreads.com/book/show/629238.The_Economic_Natu...). It is a great compilation of economic edge cases which show that the notion of utility is not so easy to capture using the standard "narrowly self-interested economic agents" world view. It requires a lot of subjective interpretation. 3. The Honest Truth about Dishonesty (https://en.wikipedia.org/wiki/The_Honest_Truth_about_Dishonesty https://en.wikipedia.org/wiki/The_Honest_Truth_about_Dishone...). Shows how contextually dependent utility (if it is at all quantifiable) can be. 4. The body of work around the Iterated Prisoner's Dilemma: (https://en.wikipedia.org/wiki/Prisoner%27s_dilemma#The_iterated_prisoner's_dilemma https://en.wikipedia.org/wiki/Prisoner%27s_dilemma#The_itera...). In particular we can see how the dynamics of simulations using rational agents diverge from the dynamics of experiments involving actual humans. This suggests that the utility assumptions used in economic analyses do not reflect whatever notion of utility that could actually apply to human behavior.
clairity 6y ago
yes, i'd heard it talked about in relation to environmental economics, and about externalities in general, e.g., "how do you price in externalities like pollution in relation to our emotional enjoyment of nature?" utility is neat in theory, but seems to be messy in practice. it's one thing to spell out the relationship, but another to calculate an analytic solution (from my limited mathematical experience, navier-stokes comes to mind in this regard).
SilasHaslam 6y ago
Relevant Freakonomics podcast with Maria Konnikova on her new book about luck, game theory, etc. They discuss von Neumann, and how he was actually a bad poker player, bud enjoyed the social aspect. https://freakonomics.com/podcast/konnikova-biggest-bluff/ https://freakonomics.com/podcast/konnikova-biggest-bluff/

tr352 6y ago

This is interesting :-) Is there any reasonably accessible literature on this topic, in particular the latter idea of not being able to estimate an agent’s utility function?

zomglings 6y ago
I'm not particularly well read in economics, and have not read anything that specifically addresses the difficulty of estimating utility. My view is rather derived from my readings on economics and related fields. The material that stands out the most in my mind are: 1. Von Neumann and Morgenstern's book (particular the sections where they develop the notion of utility) is pretty readable - https://www.goodreads.com/book/show/483055.Theory_of_Games_and_Economic_Behavior https://www.goodreads.com/book/show/483055.Theory_of_Games_a... 2. The Economic Naturalist (https://www.goodreads.com/book/show/629238.The_Economic_Naturalist https://www.goodreads.com/book/show/629238.The_Economic_Natu...). It is a great compilation of economic edge cases which show that the notion of utility is not so easy to capture using the standard "narrowly self-interested economic agents" world view. It requires a lot of subjective interpretation. 3. The Honest Truth about Dishonesty (https://en.wikipedia.org/wiki/The_Honest_Truth_about_Dishonesty https://en.wikipedia.org/wiki/The_Honest_Truth_about_Dishone...). Shows how contextually dependent utility (if it is at all quantifiable) can be. 4. The body of work around the Iterated Prisoner's Dilemma: (https://en.wikipedia.org/wiki/Prisoner%27s_dilemma#The_iterated_prisoner's_dilemma https://en.wikipedia.org/wiki/Prisoner%27s_dilemma#The_itera...). In particular we can see how the dynamics of simulations using rational agents diverge from the dynamics of experiments involving actual humans. This suggests that the utility assumptions used in economic analyses do not reflect whatever notion of utility that could actually apply to human behavior.

clairity 6y ago

yes, i'd heard it talked about in relation to environmental economics, and about externalities in general, e.g., "how do you price in externalities like pollution in relation to our emotional enjoyment of nature?" utility is neat in theory, but seems to be messy in practice. it's one thing to spell out the relationship, but another to calculate an analytic solution (from my limited mathematical experience, navier-stokes comes to mind in this regard).

SilasHaslam 6y ago

Relevant Freakonomics podcast with Maria Konnikova on her new book about luck, game theory, etc. They discuss von Neumann, and how he was actually a bad poker player, bud enjoyed the social aspect. https://freakonomics.com/podcast/konnikova-biggest-bluff/ https://freakonomics.com/podcast/konnikova-biggest-bluff/