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His methods are a replacement to the EUT framework. When you attempt to do Prospect theory with Ergonomic Economics you get back the null result: "People behav

His methods are a replacement to the EUT framework. When you attempt to do Prospect theory with Ergonomic Economics you get back the null result: "People behave as rational actors" Rather than the EUT's result of: "Faced with a risky choice leading to gains, individuals are risk-averse (concave value function). Faced with a risky choice leading to losses, individuals are risk-seeking(convex value function)." Basically ergonomics economics shows that Prospect theory is a math's error. This is one of the reasons why Ole Peters work is important.

kgwgk 6y ago
> His methods are a replacement to the EUT framework. What's the solution to this problem using his methods, for example? https://en.wikipedia.org/wiki/Merton%27s_portfolio_problem https://en.wikipedia.org/wiki/Merton%27s_portfolio_problem How do his methods apply to the uncountable situations where expected utility theory is used? A random example: https://www.researchgate.net/publication/240488954_Risk_of_dam_failure_in_benefit-cost_analysis https://www.researchgate.net/publication/240488954_Risk_of_d...
- ReflectedImage 6y ago
  I'm sure there are some great research papers that can be written by applying ergonomic economics to those problems. Is your point here that Ole Peters should convert all problems in economics to ergonomics economics all at once? Cause that's a bit of a silly point to make. There is also a fundamental problem with expected utility theory in that U can set to any formula. It's pretty close to just making stuff up on the fly.
  - kgwgk 6y ago
    What is it then? Is expected utility theory wrong and ergodicity economics is an alternative? Or is EUT too broad and ergodicity economics cannot blamed for being nothing more than a well-known way to pick a specific utility function within the EUT framework in a very constrained subset of problems? I think it's the latter. My point is that the claims of having subverted centuries of flawed economic thinking based on parallel universes are delusional. My opinion may of course improve if any of those great research papers is ever written. It would also improve if they changed their attitude and stopped saying idiotic things. I'm not sure what of those is more likely...
    - ReflectedImage 6y ago
      Expected Utility Theory (EUT) is wrong and Ergodicity Economics (EE) is an alternative. EUT is claiming there are parallel universes not EE. And your right EUT is delusional to make that claim. About your opinion: "It is difficult to get a man to understand something when his salary depends upon his not understanding it." - Upton Sinclair
      - kgwgk 6y ago
        > EUT is claiming there are parallel universes not EE. Can you back this up with a reference to anything not coming from Ole Peters (and known associates)? > "It is difficult to get a man to understand something when his salary depends upon his not understanding it." Helping to clear the confusion he creates in his full-time occupation is a just a hobby for me.
        ReflectedImage 6y ago
        It's obviously true. Let's say there is a lottery L, it has a million tickets $1 each, it pays out 1 million and 1 dollars on the winning ticket. Should you buy a ticket? EE says no. EV says yes since it has a positive EV. EE says no because in 99.999999% of cases you lose $1. EV says yes because you share the 1 million and 1 dollars out in equal portions with versions of you living in a million parallel universes, one of which won. I hope that clears this up for you. --- @drdeca: Due to missing reply button I'll reply here. The claim being made is that U is a hack. When you set U = log (Wealth), EUT gives the same result as EE. When you set U to any other function EUT gives bad answers. EE has it's own set of functions that take place of U in EUT and all of those functions give the right result whereas EUT only gives the right result when you set U = log (Wealth)
        drdeca 6y ago
        Expected utility doesn’t say that you should buy a ticket, no. Obviously no. That would only hold if you assume that utility is either linear or superlinear in money (or, more precisely, that the marginal utility of losing a dollar, times 1-(1/1 million), plus the marginal utility of gaining a million dollars, divided by 1 million, is greater than 0) If this is the sort of argument that people advocating for EE are making, it makes EE seem less worthy of attention. Oh, you said EV not EU? Ok, but no one claims that people maximize expected money. That would be stupid. Using EU rather than E$ isn’t some hack to add a fudge factor, it is capturing that people have preferences about things in general, not merely how much money they have. Placing money centrally is silly; money isn’t some universal terminal goal. It is a convergent instrumental goal. Depending on what I care about, the use of money to me will scale differently, just like how the scale of other things to each-other will. The idea of utility is to pick the quantity which I do value linearly in probability. However I take probability into account, provided I do so in a coherent way, there is a unique-up-to-positive-affine-transformation utility function which corresponds to that.

kgwgk 6y ago

> His methods are a replacement to the EUT framework. What's the solution to this problem using his methods, for example? https://en.wikipedia.org/wiki/Merton%27s_portfolio_problem https://en.wikipedia.org/wiki/Merton%27s_portfolio_problem How do his methods apply to the uncountable situations where expected utility theory is used? A random example: https://www.researchgate.net/publication/240488954_Risk_of_dam_failure_in_benefit-cost_analysis https://www.researchgate.net/publication/240488954_Risk_of_d...

ReflectedImage 6y ago
I'm sure there are some great research papers that can be written by applying ergonomic economics to those problems. Is your point here that Ole Peters should convert all problems in economics to ergonomics economics all at once? Cause that's a bit of a silly point to make. There is also a fundamental problem with expected utility theory in that U can set to any formula. It's pretty close to just making stuff up on the fly.
- kgwgk 6y ago
  What is it then? Is expected utility theory wrong and ergodicity economics is an alternative? Or is EUT too broad and ergodicity economics cannot blamed for being nothing more than a well-known way to pick a specific utility function within the EUT framework in a very constrained subset of problems? I think it's the latter. My point is that the claims of having subverted centuries of flawed economic thinking based on parallel universes are delusional. My opinion may of course improve if any of those great research papers is ever written. It would also improve if they changed their attitude and stopped saying idiotic things. I'm not sure what of those is more likely...
  - ReflectedImage 6y ago
    Expected Utility Theory (EUT) is wrong and Ergodicity Economics (EE) is an alternative. EUT is claiming there are parallel universes not EE. And your right EUT is delusional to make that claim. About your opinion: "It is difficult to get a man to understand something when his salary depends upon his not understanding it." - Upton Sinclair
    - kgwgk 6y ago
      > EUT is claiming there are parallel universes not EE. Can you back this up with a reference to anything not coming from Ole Peters (and known associates)? > "It is difficult to get a man to understand something when his salary depends upon his not understanding it." Helping to clear the confusion he creates in his full-time occupation is a just a hobby for me.
      - ReflectedImage 6y ago
        It's obviously true. Let's say there is a lottery L, it has a million tickets $1 each, it pays out 1 million and 1 dollars on the winning ticket. Should you buy a ticket? EE says no. EV says yes since it has a positive EV. EE says no because in 99.999999% of cases you lose $1. EV says yes because you share the 1 million and 1 dollars out in equal portions with versions of you living in a million parallel universes, one of which won. I hope that clears this up for you. --- @drdeca: Due to missing reply button I'll reply here. The claim being made is that U is a hack. When you set U = log (Wealth), EUT gives the same result as EE. When you set U to any other function EUT gives bad answers. EE has it's own set of functions that take place of U in EUT and all of those functions give the right result whereas EUT only gives the right result when you set U = log (Wealth)
        drdeca 6y ago
        Expected utility doesn’t say that you should buy a ticket, no. Obviously no. That would only hold if you assume that utility is either linear or superlinear in money (or, more precisely, that the marginal utility of losing a dollar, times 1-(1/1 million), plus the marginal utility of gaining a million dollars, divided by 1 million, is greater than 0) If this is the sort of argument that people advocating for EE are making, it makes EE seem less worthy of attention. Oh, you said EV not EU? Ok, but no one claims that people maximize expected money. That would be stupid. Using EU rather than E$ isn’t some hack to add a fudge factor, it is capturing that people have preferences about things in general, not merely how much money they have. Placing money centrally is silly; money isn’t some universal terminal goal. It is a convergent instrumental goal. Depending on what I care about, the use of money to me will scale differently, just like how the scale of other things to each-other will. The idea of utility is to pick the quantity which I do value linearly in probability. However I take probability into account, provided I do so in a coherent way, there is a unique-up-to-positive-affine-transformation utility function which corresponds to that.