Oh my goodness I love this. I’m actually so philosophically on board that I’m confused about treating Cheerful Prices as single real numbers. In my homo-economicus worldview, there exists a single price at which I’m exactly indifferent and then my cheerfulness goes up smoothly/continuously from there. It feels very arbitrary to pick something on that continuum and call it “the” cheerful price I have.
(My answer is to turn the nerdery up to 11 and compute a Shapley value, etc etc, but let me save that for another time or place. Jacob Falkovich and I have been talking about jointly blogging about this. We’ll definitely want to tie it in to the concept of Cheerful Prices if we do!)
Translated into this delightful new language of Cheerful Prices, the rough version of my approach is like so:
I as the buyer name my lowest possible Cheerful Price (where I just barely find it worth it) and you as the seller name your highest possible Cheerful Price (above which it’s just not worth it to you) and we settle on the mean of those two.
But maybe the point of Cheerful Prices is to simplify that. Let one person on one side of the trade make a guess about the consumer surplus and name something in that range. I.e., by naming my Cheerful Price I’m saying that at that price I’d be getting a big enough chunk of the consumer surplus that I don’t need to know the size of your chunk. If you, as my counterparty, feel the same then we’re golden.
In my homo-economicus worldview, there exists a single price at which I’m exactly indifferent and then my cheerfulness goes up smoothly/continuously from there. It feels very arbitrary to pick something on that continuum and call it “the” cheerful price I have.
When I think about cheerful prices, I don’t think this necessarily fits my experience. For instance, in this comment, I talk about how even at absurdly high prices, I wouldn’t be cheerful (even if I thought it was “worth it”) because I would still be sad about the thing I was paying for.
That reminds me of this delightful and hilarious (edit: and true!) thing Eliezer said once:
Let me try to clear up the notion that economically rational agents must be cold, heartless creatures who put a money price on everything.
There doesn’t have to be a financial price you’d accept to kill every sentient being on Earth except you. There doesn’t even have to be a price you’d accept to kill your spouse. It’s allowed to be the case that there are limits to the total utility you know how to generate by spending currency, and for anything more valuable to you than that, you won’t exchange it for a trillion dollars.
Now, it *does* have to be the case for a von Neumann-Morgenstern rational agent that if a sum of money has any value to you at all, you will exchange anything else you have—or any possible event you can bring about -- *at some probability* for that sum of money. So it *is* true that as a rational agent, there is some *probability* of killing your spouse, yourself, or the entire human species that you will cheerfully exchange for $50.
I hope that clears up exactly what sort of heartless creatures economically rational agents are.
Oh my goodness I love this. I’m actually so philosophically on board that I’m confused about treating Cheerful Prices as single real numbers. In my homo-economicus worldview, there exists a single price at which I’m exactly indifferent and then my cheerfulness goes up smoothly/continuously from there. It feels very arbitrary to pick something on that continuum and call it “the” cheerful price I have.
(My answer is to turn the nerdery up to 11 and compute a Shapley value, etc etc, but let me save that for another time or place. Jacob Falkovich and I have been talking about jointly blogging about this. We’ll definitely want to tie it in to the concept of Cheerful Prices if we do!)
Translated into this delightful new language of Cheerful Prices, the rough version of my approach is like so:
I as the buyer name my lowest possible Cheerful Price (where I just barely find it worth it) and you as the seller name your highest possible Cheerful Price (above which it’s just not worth it to you) and we settle on the mean of those two.
But maybe the point of Cheerful Prices is to simplify that. Let one person on one side of the trade make a guess about the consumer surplus and name something in that range. I.e., by naming my Cheerful Price I’m saying that at that price I’d be getting a big enough chunk of the consumer surplus that I don’t need to know the size of your chunk. If you, as my counterparty, feel the same then we’re golden.
When I think about cheerful prices, I don’t think this necessarily fits my experience. For instance, in this comment, I talk about how even at absurdly high prices, I wouldn’t be cheerful (even if I thought it was “worth it”) because I would still be sad about the thing I was paying for.
That reminds me of this delightful and hilarious (edit: and true!) thing Eliezer said once:
Yeah I mean it’s pretty clear to me when I’m talking about things that make me “cheerful” that my feelings are fairly scope insensitive