3 ms·
One common assumption is that utility is logarithmic in money, i.e. that you become "one unit happier" not by adding $100K but by doubling your income. This mat
by JoachimSchipper 15y ago
One common assumption is that utility is logarithmic in money, i.e. that you become "one unit happier" not by adding $100K but by doubling your income. This matches actual human behavior fairly well, and implies that you should buy insurance (losing everything is really bad) but not lottery tickets (winning $BIGNUM makes you less happy than you'd think).
- Kuiper 14y agoActually, according to this article, certain kinds of insurance are less effective at optimizing happiness, because we are psychologically equipped to adapt to new (bad) circumstances: http://www.wjh.harvard.edu/~dtg/DUNN%20GILBERT%20&%20WILSON%20(2011).pdf http://www.wjh.harvard.edu/~dtg/DUNN%20GILBERT%20&%20WIL... (page 6 for remarks on insurance) Obviously, certain kinds of disaster pose a greater threat to happiness than others. For example, health insurance may be a worthwhile investment for some, while property insurance may not.