I have a non-rhetorical question for you: do you actually think a significant fraction of people playing the lottery and taking crack cocaine actually maximize utility that way?
Maybe. I think that if we see poor people systematically playing the lottery more often than well-off people do, differences in utility functions are at least as good an explanation as differences in intelligence.
If utility functions are sigmoidal, this in itself would predict poor people to play the lottery much more often than rich people.
The “poor people are stupid” explanation says that poor people are less likely to grasp how small the probability of winning is. I’m skeptical that IQ 100 or even IQ 115 people grasp such small numbers any better.
Crack use is high in neighborhoods where people are not just poor, but have a high probability of dying or ending up in prison. Look at the Sandtown Health Profile 2008. A person in Sandtown has a 1 in 6 chance of dying before reaching age 45. For males, it’s higher. A man who “lives in Sandtown” is more likely to actually live in prison than in Sandtown. I didn’t cherry-pick Sandtown; I chose it because my mom used to work at a day care there. A man living there, deciding whether to take up crack, has fewer expected years of good life lost than someone living in Fairfax.
In general, when we see one group of people consistently engaging in higher levels of behavior that seems irrational to us, there’s a good chance that something in their environment makes that behavior more rational for them than for us.
Sure, causality runs both ways. My point is that the idea that crack use is a rational decision predicts that crack use will be higher when the odds of dying or of spending much of your life in prison are higher. And that is what we see. It’s a falsifiable test, and the idea passes the test.
Are there studies of behavior changes for terminally ill people? That wouldn’t probe changes in financial behavior—winning the lottery isn’t useful to someone with pancreatic cancer. Do we see recreational drug use rise?
“Poor people are stupid” is a strawman, in this case. Human beings in general have trouble grasping low probabilities. Poor people just have further motivations that lead them to grasp harder at this straw.
If we don’t believe that the shape of their utility curves makes the lottery have a higher expected utility for poor people than for well-off people, then we are saying that poor people don’t have any further motivations than rich people to grasp at this straw.
It’s possible (indeed, plausible) both that (a) poor people have these utility functions, and therefore more reason to play the lottery; and (b) it’s still irrational for them to play the lottery.
Yes. I’m not thinking of rationality as a line that people either cross or don’t. If you say that rationality is maximizing your expected utility, then none of us are rational.
If they have more reason to play the lottery than we at first thought, then they are more rational than we at first thought.
I have a non-rhetorical question for you: do you actually think a significant fraction of people playing the lottery and taking crack cocaine actually maximize utility that way?
Maybe. I think that if we see poor people systematically playing the lottery more often than well-off people do, differences in utility functions are at least as good an explanation as differences in intelligence.
If utility functions are sigmoidal, this in itself would predict poor people to play the lottery much more often than rich people.
The “poor people are stupid” explanation says that poor people are less likely to grasp how small the probability of winning is. I’m skeptical that IQ 100 or even IQ 115 people grasp such small numbers any better.
Crack use is high in neighborhoods where people are not just poor, but have a high probability of dying or ending up in prison. Look at the Sandtown Health Profile 2008. A person in Sandtown has a 1 in 6 chance of dying before reaching age 45. For males, it’s higher. A man who “lives in Sandtown” is more likely to actually live in prison than in Sandtown. I didn’t cherry-pick Sandtown; I chose it because my mom used to work at a day care there. A man living there, deciding whether to take up crack, has fewer expected years of good life lost than someone living in Fairfax.
In general, when we see one group of people consistently engaging in higher levels of behavior that seems irrational to us, there’s a good chance that something in their environment makes that behavior more rational for them than for us.
“Crack use is high in neighborhoods where people are not just poor, but have a high probability of dying or ending up in prison.”
Are you entirely certain you have the arrow of causality pointing in the right direction? This question is rhetorical.
Sure, causality runs both ways. My point is that the idea that crack use is a rational decision predicts that crack use will be higher when the odds of dying or of spending much of your life in prison are higher. And that is what we see. It’s a falsifiable test, and the idea passes the test.
Are there studies of behavior changes for terminally ill people? That wouldn’t probe changes in financial behavior—winning the lottery isn’t useful to someone with pancreatic cancer. Do we see recreational drug use rise?
“Poor people are stupid” is a strawman, in this case. Human beings in general have trouble grasping low probabilities. Poor people just have further motivations that lead them to grasp harder at this straw.
If we don’t believe that the shape of their utility curves makes the lottery have a higher expected utility for poor people than for well-off people, then we are saying that poor people don’t have any further motivations than rich people to grasp at this straw.
It’s possible (indeed, plausible) both that (a) poor people have these utility functions, and therefore more reason to play the lottery; and (b) it’s still irrational for them to play the lottery.
Yes. I’m not thinking of rationality as a line that people either cross or don’t. If you say that rationality is maximizing your expected utility, then none of us are rational.
If they have more reason to play the lottery than we at first thought, then they are more rational than we at first thought.