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"Old people make less money than young people on purpose because of expected utility preferences." You need to prove this whilst keeping in mind that ergodicit

"Old people make less money than young people on purpose because of expected utility preferences." You need to prove this whilst keeping in mind that ergodicity economics takes account of factors that regular economics does not. You would need to show it wasn't one of those factors being responsible. Ole Peters has already done the studies on people (outsourced to a psychology department) to show they are following his economics model.

hntrader 6y ago
"You need to prove this " It's already well established. Lifecycle investing is common practice among pension funds. "You would need to show it wasn't one of those factors" Firstly, I'm not the one with the burden of proof that has to check whether this fits the theory. Secondly, you're misunderstanding my objection. What I'm objecting to are the very conceptual foundations of the theory. Old people demonstrably accept a lower EV than young people because of a difference in expected utility over the distribution of near-term outcomes. To throw the concept of expected utility in the bin is therefore a departure from reality and as such the theory automatically fails on conceptual grounds.
- ReflectedImage 6y ago
  The maths of Ergodicty Economics has been checked by a Nobel prize winning physicist. No one has been able to contest it. You can look all through the comment section, you won't find anyone claiming the maths is wrong. Ergodicty economics disproves EUT. EUT is rejected on solid mathematical grounds. Saying Expected Utility is correct is no different than claiming that 2 + 2 = 5. Though the maths involved is a bit more complicated.
  - hntrader 6y ago
    Once again, you are misunderstanding my objection. The math of EE is correct given the axioms from which it is deduced. Nobody anywhere is disputing that. What I'm disputing is whether it is a theory that explains human financial decision making, in the same way that some physicists dispute that string theory explains physical reality (despite acknowledging that the math behind string theory is deductively correct). "Saying Expected Utility is correct" It is conceptually correct, as my old vs young example shows. The fact that EE fails to model this is a fatal counterexample. Once again - the math IS deductively correct, but that same math fails as a theory of financial decision making since it doesn't explain the observed reality.
    - ReflectedImage 6y ago
      There are studies that show that people follow EE and not EUT. It's the other way around EUT fails as a theory of financial decision making since it doesn't explain the observed reality.
      - hntrader 6y ago
        I'm talking about the concept of expected utility. If EE does away with that concept, then it is a failed theory on conceptual grounds. Without this concept, tell me how EE is supposed to grapple with: (1) gamblers who take on negative EV bets (2) old people who shift into fixed income (3) low risk-tolerance young people who keep only cash (4) high risk-tolerance young people who put everything into crypto (5) why some people buy insurance and some don't, despite earning the same income The fact is, you can't explain this heterogeneous behaviour without the concept of expected utility of outcomes. Our brains are emotional, irrational vehicles designed by evo psych, and you can't grapple with that reality without some notion of subjective preference pertaining to expected outcome.
        ReflectedImage 6y ago
        Okay so let me cut this down. EE shows that EUT only gives correct results when U = log (Wealth), that means as soon as you set U to anything other than log (Wealth), it is no longer giving correct results. So it would be fair to say EUT also has no concept of utility.
        kgwgk 6y ago
        How do you define "correct results"? Talking about portfolio selection, for example, the EE - a.k.a. U=log(wealth) - solution may be the "correct solution" to the "we never spend a dollar problem and we have an infinite horizon" problem. But EE cannot get any results, correct or otherwise, for many other problems that are much more interesting where EUT can be applied. Like investment decisions when your horizon is not infinite and you intend to use the money at some point.
        6y ago
  - kgwgk 6y ago
    > Though the maths involved is a bit more complicated. Do you claim to understand them or are you just relaying the claims from others? We don't even know what do you mean by EUT.
    - ReflectedImage 6y ago
      I've discussed this topic with several economics professors, thank you very much.
      - kgwgk 6y ago
        You’re welcome. Do they agree that EUT is incorrect because it’s about interacting with copies of yourself in parallel universes? Maybe they think that EUT is too limited to explain the world but then they won’t be impressed with the more restrictive EE.
        ReflectedImage 6y ago
        I did a 3 day conversation with them over twitter. You aren't going to come up with something they didn't.
        deleted 6y ago
        [deleted]
  - kgwgk 6y ago
    Is there any example of ergodicity economics doing something other than selecting an utility function? If Expected Utility is not correct all the solutions proposed by Ergodicity Economics cannot be correct either.

hntrader 6y ago

"You need to prove this " It's already well established. Lifecycle investing is common practice among pension funds. "You would need to show it wasn't one of those factors" Firstly, I'm not the one with the burden of proof that has to check whether this fits the theory. Secondly, you're misunderstanding my objection. What I'm objecting to are the very conceptual foundations of the theory. Old people demonstrably accept a lower EV than young people because of a difference in expected utility over the distribution of near-term outcomes. To throw the concept of expected utility in the bin is therefore a departure from reality and as such the theory automatically fails on conceptual grounds.

ReflectedImage 6y ago
The maths of Ergodicty Economics has been checked by a Nobel prize winning physicist. No one has been able to contest it. You can look all through the comment section, you won't find anyone claiming the maths is wrong. Ergodicty economics disproves EUT. EUT is rejected on solid mathematical grounds. Saying Expected Utility is correct is no different than claiming that 2 + 2 = 5. Though the maths involved is a bit more complicated.
- hntrader 6y ago
  Once again, you are misunderstanding my objection. The math of EE is correct given the axioms from which it is deduced. Nobody anywhere is disputing that. What I'm disputing is whether it is a theory that explains human financial decision making, in the same way that some physicists dispute that string theory explains physical reality (despite acknowledging that the math behind string theory is deductively correct). "Saying Expected Utility is correct" It is conceptually correct, as my old vs young example shows. The fact that EE fails to model this is a fatal counterexample. Once again - the math IS deductively correct, but that same math fails as a theory of financial decision making since it doesn't explain the observed reality.
  - ReflectedImage 6y ago
    There are studies that show that people follow EE and not EUT. It's the other way around EUT fails as a theory of financial decision making since it doesn't explain the observed reality.
    - hntrader 6y ago
      I'm talking about the concept of expected utility. If EE does away with that concept, then it is a failed theory on conceptual grounds. Without this concept, tell me how EE is supposed to grapple with: (1) gamblers who take on negative EV bets (2) old people who shift into fixed income (3) low risk-tolerance young people who keep only cash (4) high risk-tolerance young people who put everything into crypto (5) why some people buy insurance and some don't, despite earning the same income The fact is, you can't explain this heterogeneous behaviour without the concept of expected utility of outcomes. Our brains are emotional, irrational vehicles designed by evo psych, and you can't grapple with that reality without some notion of subjective preference pertaining to expected outcome.
      - ReflectedImage 6y ago
        Okay so let me cut this down. EE shows that EUT only gives correct results when U = log (Wealth), that means as soon as you set U to anything other than log (Wealth), it is no longer giving correct results. So it would be fair to say EUT also has no concept of utility.
        kgwgk 6y ago
        How do you define "correct results"? Talking about portfolio selection, for example, the EE - a.k.a. U=log(wealth) - solution may be the "correct solution" to the "we never spend a dollar problem and we have an infinite horizon" problem. But EE cannot get any results, correct or otherwise, for many other problems that are much more interesting where EUT can be applied. Like investment decisions when your horizon is not infinite and you intend to use the money at some point.
        6y ago
- kgwgk 6y ago
  > Though the maths involved is a bit more complicated. Do you claim to understand them or are you just relaying the claims from others? We don't even know what do you mean by EUT.
  - ReflectedImage 6y ago
    I've discussed this topic with several economics professors, thank you very much.
    - kgwgk 6y ago
      You’re welcome. Do they agree that EUT is incorrect because it’s about interacting with copies of yourself in parallel universes? Maybe they think that EUT is too limited to explain the world but then they won’t be impressed with the more restrictive EE.
      - ReflectedImage 6y ago
        I did a 3 day conversation with them over twitter. You aren't going to come up with something they didn't.
        deleted 6y ago
        [deleted]
- kgwgk 6y ago
  Is there any example of ergodicity economics doing something other than selecting an utility function? If Expected Utility is not correct all the solutions proposed by Ergodicity Economics cannot be correct either.