Who is the counterparty in these bets? What are they going to do with your money if you lose? What actions do they have to forgo if you win?
This is especially relevant in discussions of altruism, since the assumption that utility is increased by you winning implies that you will put better use to it than they will. That won’t be true for all possible counterparties, so you need to consider the uncertainty of whether it’s actually a good thing that you win.
If the process of making these bets burns any value in addition to the zero-sum money transfer, you might even destroy value in all outcomes.
Endorsed. I wildly guess that in practice “counterparty might do better with the money than me” will rarely be a big consideration; but I could see “transaction costs plus externalities plus harm to counterparty, together burn more value than my charitable donations create” being a thing, especially if you’re doing low-margin high-volume.
Who is the counterparty in these bets? What are they going to do with your money if you lose? What actions do they have to forgo if you win?
This is especially relevant in discussions of altruism, since the assumption that utility is increased by you winning implies that you will put better use to it than they will. That won’t be true for all possible counterparties, so you need to consider the uncertainty of whether it’s actually a good thing that you win.
If the process of making these bets burns any value in addition to the zero-sum money transfer, you might even destroy value in all outcomes.
Endorsed. I wildly guess that in practice “counterparty might do better with the money than me” will rarely be a big consideration; but I could see “transaction costs plus externalities plus harm to counterparty, together burn more value than my charitable donations create” being a thing, especially if you’re doing low-margin high-volume.