[extropy-chat] Bayes, betting and derivatives

[Brandon Reinhart]

Isn't there some advantage in this scenario of the perfectly rational
Bayesian wannabe to act in a calculatedly irrational manner in order to
betray the expectations of his rivals? The others would take into account
the possibility of "rationally calculated irrationality" but would that be
sufficient to counter the phenomena? For example, it might be Bayesian
wannabe A's goal to deceive wannabe B into a particular action...to
manipulate how B weighs decisions? To "mess with his priors?" (Is there such
a thing as Bayesian slang in a homo economicus culture?) I presume the
"victim" would already have determined a certain possible outcome in which
they are deceived...

BUT, this does lead to a scenario in which making a bet could be a tactic of
rationally calculated irrationality. This is the soul of the betting game:
making bets that disguise your intent, such that it isn't clear when your
bets are rational or irrational.

That seems to me to answer Mr. Sullivan's question "would a population of
Bayesian wannabes have use for making bets."

Unless the universal rational recognition of the possibility of rationally
calculated irrationality leads to the conclusion that such behavior is
ultimately not productive. Or the opposite spectrum is that the benefit is
consistent enough that you devolve into a society of sociopathic cheats.

Hehe.

Brandon Reinhart

-----Original Message-----
From: extropy-chat-bounces at lists.extropy.org
[mailto:extropy-chat-bounces at lists.extropy.org] On Behalf Of Eliezer S.
Yudkowsky
Sent: Monday, June 05, 2006 8:54 PM
To: ExI chat list
Subject: Re: [extropy-chat] Bayes, betting and derivatives

Robin Hanson wrote:
> 
> Risk-averse Bayesian wannabes would not make pure bets with each other
> seeking financial gain.   Risk-loving ones might make bets, but only to
> achieve the risk they want, not because of any disagreement.
Derivatives
> markets supposedly help people to hedge risk, and not just to make bets.
> And a patron who wanted to get answers to a question might subsidize
> a betting market, thereby inducing Bayesian wannabes to bet there.

Why would Bayesian wannabes with common knowledge of each other's 
rationality have any expectation of gain in a betting market?  Why would 
I ever sell my bet - given the fact that you offer me more money than I 
thought my bet was worth, and I believe you to be rational, and I 
believe you expect to make a profit?  Wouldn't I just adjust my estimate 
of the fair price upward, and then refuse to sell?

-- 
Eliezer S. Yudkowsky                          http://singinst.org/
Research Fellow, Singularity Institute for Artificial Intelligence
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