“Deciding how to accumulate COVID risk” closely resembles “deciding how to spend a small fraction of your money,” but not “deciding how to spend a large fraction of your money”: when money is tight, the territory contains a threshold that’s costly to go over, so your decision-making process should also contain a threshold that shouldn’t be gone over, i.e. a budget; but there is no such nonlinearity when accumulating (normal amounts of) COVID risk, or when spending a small fraction of your money.
In principle the right way to make my choice [of what to buy] is to figure out what utility I’ll get from each possibility, figure out what utility I’ll get from having any given amount more savings, and choose whatever maximizes the total… A common solution is to first pick some amount of money that seems reasonable… And then to go shopping and be guided by that budget.
Actually, I’m not sure I disagree with any of your explicit claims. The only claim I think we might disagree on is something like “budgeting is a good strategy even when costs/benefits add pretty much linearly,” as in the ‘spend a small fraction of your money’ or ‘accumulate COVID risk’ scenarios: I perceive you as agreeing with that statement, whereas I disagree with it (because it encourages you to think in terms of “whether I’ll exceed my budget” instead of the ground truth).
If you do endorse that bolded statement, I’m curious why. I read your comment as explaining why people do budget in low-stakes scenarios, but not why that’s optimal. (My best guess at your answer, reading between the lines, is “because it saves a lot of error-prone calculation,” which, hmm, doesn’t speak to me personally, but people differ, and maybe I overestimate my own ability to do good cost/benefit calculations.)
(Don’t get me wrong, I do sometimes do something that looks like budgeting, as you describe, when I’m spending small amounts of money; but I view it as a bad habit that I want to break myself of—with a proper eye towards TDT, though, of course.)
(I don’t know why I wrote “initial purchase choices” when I meant “individual purchase choices”, but obviously it was comprehensible anyway.)
As for whether budgeting is ever a good idea when the amounts are small enough for utility to be close to linear—I think it does two useful things: it saves cognitive effort, and it may help you resist spending more than, on careful and sober reflection, you would want to. How often those are worth the utility-loss from using a cheap approximation will vary.
Thanks for the thoughtful counterargument!
Things I think we agree on:
Yes, absolutely, strong agreement.
“Deciding how to accumulate COVID risk” closely resembles “deciding how to spend a small fraction of your money,” but not “deciding how to spend a large fraction of your money”: when money is tight, the territory contains a threshold that’s costly to go over, so your decision-making process should also contain a threshold that shouldn’t be gone over, i.e. a budget; but there is no such nonlinearity when accumulating (normal amounts of) COVID risk, or when spending a small fraction of your money.
Actually, I’m not sure I disagree with any of your explicit claims. The only claim I think we might disagree on is something like “budgeting is a good strategy even when costs/benefits add pretty much linearly,” as in the ‘spend a small fraction of your money’ or ‘accumulate COVID risk’ scenarios: I perceive you as agreeing with that statement, whereas I disagree with it (because it encourages you to think in terms of “whether I’ll exceed my budget” instead of the ground truth).
If you do endorse that bolded statement, I’m curious why. I read your comment as explaining why people do budget in low-stakes scenarios, but not why that’s optimal. (My best guess at your answer, reading between the lines, is “because it saves a lot of error-prone calculation,” which, hmm, doesn’t speak to me personally, but people differ, and maybe I overestimate my own ability to do good cost/benefit calculations.)
(Don’t get me wrong, I do sometimes do something that looks like budgeting, as you describe, when I’m spending small amounts of money; but I view it as a bad habit that I want to break myself of—with a proper eye towards TDT, though, of course.)
(I don’t know why I wrote “initial purchase choices” when I meant “individual purchase choices”, but obviously it was comprehensible anyway.)
As for whether budgeting is ever a good idea when the amounts are small enough for utility to be close to linear—I think it does two useful things: it saves cognitive effort, and it may help you resist spending more than, on careful and sober reflection, you would want to. How often those are worth the utility-loss from using a cheap approximation will vary.