Financial incentives don’t get rid of bias? Prize for best answer.
I’m trying to better understand the relationship between incentivization and rationality, and it occurred to me that it is a “folk fact” around here that large financial incentives don’t make cognitive biases go away.
However, I can’t seem to find any papers that actually say this. It’s not easy to google for (I have tried) so I wonder if the Less Wrong collective memory knows how to find the papers?
Is there a pattern to which biases go away with incentivization? Do we have at least 5 examples of biases that go away with incentivization and 5 examples that don’t go away with incentivization?
As an incentive, I’ll paypal $10 to the commenter whose answer is least biased and most useful.
That’s what my notes says was the famous experiment which tested some biases, I forget which, in China using offers of up to several months equivalent salary. Just a fast answer grabbed from my notes, I didn’t try to Google or check notes for what the experiment was about.
EDIT: Paper here, seems to be about pricing some simple lotteries. http://decisions.epfl.ch/ExpFinance/readings/KachelmeierShehata.pdf
Thanks, I’ll take a look and report.
I think that I’m going to split the prize for best comment between this and Vladimir_M’s comment.
The GRGRRR problem in Kahneman and Tversky’s 1982 paper shows almost identical results whether or not the subjects got a $25 reward for winning.
Well, if someone knows about systematic biases that don’t go away with incentivization, they’re probably too busy making money off that insight to comment here!
In practice, when the stakes are high, it is not so much that people start thinking more accurately—though this will happen to some extent, and for some people dramatically so—but rather that they become more cautious.
If you take ordinary folks into the lab and ask them questions they don’t care about, it’s easy to get them to commit all sorts of logical errors. However, if you approach them with a serious deal where some bias identified in the lab would lead them to accept unfavorable terms with real consequences, they won’t trust their unreliable judgments, and instead they’ll ask for third-party advice and see what the normal and usual way to handle such a situation is. If no such guidance is available, they’ll fall back on the status quo heuristic. People hate to admit their intellectual limitations explicitly, but they’re good at recognizing them instinctively before they get themselves into trouble by relying on their faulty reasoning too much.
This is why for all the systematic biases discussed here, it’s extremely hard to actually exploit these biases in practice to make money. It also explains how market bubbles and Ponzi schemes can lead to such awful collective insanity: as the snowball keeps rolling and growing, people see others massively falling for the scam, and conclude that it must be a safe and sound option if all these other normal and respectable folks are doing it. The caution/normality/status quo heuristics break down in this situation.
Yeah… this is what Bryan Caplan says in The Myth of the Rational Voter
If you read the Book on Checklists (which I HIGHLY recommend to everyone) its filled up with examples of a) people getting consistently saved due to checklists and b) trained professionals not wanting to bother with such a mundane thing. Most of these actually care about their patents still.
Also in the book was an example of a baseball team figuring out how the standard scoring methods are slightly off, finding a better one and then buying up undervalued players. The more I look, the more examples of professionals ignoring sound methods to be reliably more successful I find and so I think opportunities for un-biased action are everywhere. But many don’t really lead to that much more success.
What do you mean by “Book on Checklists”? Atul Gawande’s “The Checklist Manifesto”?
Yes.
So this actually contradicts the paper that Eliezer cited, or at least seems to, yet it seems to ring true. Not only does the hypothesis that incentive reduces bias seem convincing to you and I, but it also forms a whole Chapter of Caplan’s book “The Myth of the Rational Voter”.
I think I’m going to split the prize between this comment and Eliezer Yudkowsky’s one. Feel free to PM me and claim your prize.
Roko:
There is no contradiction. This paper shows that when stakes increase, people start thinking somewhat more accurately, but not drastically so—which is exactly what I wrote above.
What these researchers did was not the sort of thing that triggers people’s caution/normality/status-quo heuristics that I had in mind. They put people in a situation where they stood only to gain free money, and were forced to choose between several options, each with a guaranteed non-negative outcome. A study that would actually test my claims would observe people in a situation where they could lose a significant amount of their own money by accepting a bad deal based on biased reasoning.
Of course, this actually happens sometimes, for example with people who ruin themselves by compulsive gambling. But these are rare exceptions, not instances of all-pervasive systematic biases.
I don’t have a Paypal account, but you can buy me a beer next time I’m over in the U.K. :-)
I’m prepared to double-or-nothing that $5 on the claim that loss aversion would kick in and they’d go insane and do even worse than in the winnings-only study.
Yeah… that sounds right. Also, suppose that you have an irrational stock price. One or two contrarians can’t make much more than double their stake money out of it, because if they go leveraged, the market might get more irrational before it gets less irrational, and wipe their position.
“The market can stay irrational longer than you can stay solvent.”—John Maynard Keynes
Well, I would have done some research and gotten a warm fuzzy feeling out of expanding my knowledge, but if you’re going to displace that motivation with only a chance at a measly $10 I guess it’s not worth my time.
http://naggum.no/motivation.html
But I wouldn’t be surprised if Less Wrong readers are eager to signal that they are less biased/better comment writers with money at stake (because that’s the “rational way to be”), so Roko’s offer might end up resulting in better comments anyway.
Here’s an example where large potential incentives have failed to override bias—I think it’s an example of what you’re looking for.
Good clothing for fat women has very limited availability.
You might think that the unending publicity about people getting fatter combined with a modest amount of observation that people like dressing well would lead to the conclusion that there are a lot of people who’d pay plenty, but it doesn’t seem to register.
Or were you looking for explicit incentives which don’t require effort to notice?
A different case of incentives failing to work: People haven’t gotten better at avoiding market bubbles.
What I want to know is why no one sells half-bras. There’s a market: most women are at least somewhat asymmetrical, plenty by enough to warrant different cup sizes. It wouldn’t be revolutionary bra technology: it would just have to fasten in the front and the back both and be packaged individually. And it wouldn’t take up much extra store space to stock the same range of sizes. I looked once, and there’s a patent on it, but no one seems to actually manufacture the things.
There’s an even more compelling market: women who have had a single mastectomy. I’d be surprised if there weren’t medical half-bras out there already for them.
It wouldn’t surprise me. It’s cosmetically expected that asymmetries like that be corrected for the visual benefit of others (and for the purpose of making clothes fit) with fills or some other sort of padding. That’s also the suggestion I’ve tended to get when I’ve expressed a wish for half-bras.
You’re right, I should’ve thought of that. I expect it’s easier (maybe therefore cheaper?) to manufacture little silicone blobs or whatever than a half-bra, which must partly be why there’s a market for the first and not the second.
It wouldn’t be hard to manufacture a half-bra. They already have bras that clasp in front and ones that clasp in the back; there is no obvious structural reason why they couldn’t make one that does both and then sell the parts separately. In fact, based on the sorts of bras that already exist, it wouldn’t be that hard to have a bunch of bins of detached bra parts that could be assembled in any fashion desired. There are bras with detachable straps, too, so there’s clearly no structural reason they have to be permanently affixed and therefore no reason they couldn’t be swapped out consumer-side for preferred versions. Most women wear bras that do not fit because there are so many things that need to be right and custom-made ones run into the hundreds of dollars. But it seems an obvious market failure that I can’t go into a store, pick out a left cup and a right cup and the straps of my choice, and walk out with something that will work better for me than anything I could find in Target without significant extra expense.
Most people have different sized feet and shoes are already separate yet shoes are sold in pairs of matching sizes. I suspect that if you can figure out why that is you will also gain insight into the bra question.
I’m pretty sure that at some point in my childhood I needed mismatched shoe sizes, possibly by as much as a full size — and was able to get them.
OTOH, look at the signaling implications of such a purchase. There’s a big difference between knowing you’re asymmetrical, and going and buying special clothing because of it. Sure, some people will buy it, but it seems unlikely to achieve mass acceptance.
Having thought about it a little longer and updated based on your evidently broader knowledge of bras, my original guess for why the market failure exists does seem pretty unlikely.
To the extent that ‘good’ equals ‘fashionable’ for clothing I suspect this is a harder problem than it initially seems. What is fashionable is largely defined by what trend setting / fashionable people are currently wearing and the set of trend setting / fashionable women is almost entirely disjoint from the set of fat women. Therefore styles and cuts that are designed to flatter fat women will never become fashionable and fashionable clothing will not scale up well to body shapes it was not designed for.
If you actually wanted to address this issue you’d have to make fat women into trend setters which is a much harder problem than simply scaling up fashionable clothing. The market need you have identified is largely targeted by the dieting and weight loss industries which are very large and profitable.
In this context, “good” means durable, pleasant-looking, and not unfashionable.
From what I’ve seen of the clothes that fat women are enthusiastic about, they tend to be somewhat simpler and more classic looking than the mainstream. I don’t know whether this is making the best of what’s available, or whether most thin women would prefer that sort of thing if they could get it.
Or maybe my perceptions of the difference are off. I’m actually not that interested in clothes.
It may be a bit more complicated than just bias vs. financial incentive. Just because you want to provide plus-size clothing, doesn’t mean you have any idea how to design for the market, or that it’s actually profitable for a given store to try to reach the plus-size market. (Among the problems: what parts of a person are “plus-sized” can vary considerably!)
The manufacturers my wife buys from for her lingerie store’s inventory generally have some sort of plus sizes, but it’s hard for her to carry enough variety of things that would actually “work” for a wide enough variety of women to offset the carrying cost in floor space and inventory investment. As a plus-sized woman herself, my wife found this annoying, but as a businesswoman, she shrank the selection to reflect the financial reality of the matter.
(Another local lingerie store, one that actually chose to focus its entire inventory and marketing on plus-sized women, went belly-up in relatively short order, though of course most new businesses do.)
It’s certainly true that it would take a good bit of capital and knowledge to do a significant job of supplying plus size clothing which is as fashionable and well made as the what’s now available for thinner women, but it’s a little surprising that no one’s managed it. I was thinking more about manufacturers than retailers—retailers can’t sell what doesn’t exist.
Your wife’s problem does reflect a hard constraint—fat women will have all the variation in skeletal proportions and muscle that thin and medium build women do plus a lot of variation in fat distribution.
If you check back at the link in my previous post, there’s one fat woman who says things have gotten better, in contrast to several others who say it’s mostly worse.
I think that the reason that people don’t sell good clothing for fat women is the intersection of existing manufacturers not wanting to sell clothing for fat women, because doing so would lower their status, and fat women don’t want to buy good clothing from exclusively for fat women retailers, because doing so would lower their status. I wish I could see a way to take advantage of this market opportunity. Does anyone have any ideas?
Status is part of it, but there’s a perfectly good statistical explanation too.
There is much higher variance among fat people than among thin people. It’s the long tail of the distribution. So plus sizes are much more approximate. It’s more likely that the clothes won’t fit. This also makes the return on each additional size lower—there may be a lot of plus-size women generally, but they’re spread out enough that there aren’t a lot of size 16s specifically.
I don’t think that accounts for everything, but it is part of it.
You’re already seeing more good plus-size fashion, I think, of necessity. It’s coming.
Maybe it would make sense to sell clothes that are very easy to “let out” at home. I could imagine, for instance, a skirt that you could add extra pleating to with snaps or buttons inside the waistband. You could put it on the rack with all the buttons done, so the customer doesn’t need to be seen shopping in a “fat section” and the exact same style would be of a type open to thin women, and it could triple in possible size if you undid them all without needing to be made of an unflattering stretchy fabric. If one needed to undo some but not all of the pleats, the choice of which to undo would be a nifty bit of extra customization.
Man, now I want a skirt like that. Or four.
Please post about how the skirt works out. I think the additional fabric will bunch up when the skirt is in its smaller mode, but I could be mistaken.
I have a skirt with a lot of fabric in it that gathers up at an (elastic) waist. I imagine my idea would wind up working much the same way. It looks fine and it’s comfortable and twirly! I do think it would be important to make the button-waist skirt out of a thin, ideally woven fabric.
Maybe. I still think the fact that it was in any way designed for fat people, even if usable by thin people, would cause the status concerns. Also, clothing that you (assuming you don’t have crazy seamstressing skills) modify tend not to be “good” clothing which was what the OP was about.
I find myself tempted to sell the idea just because I personally really want a skirt like this. That probably means that I should sell it to my mom, as opposed to Less Wrong, because she might sew me one without needing to think it’s an entrepreneurial bonanza. But I think people besides me might buy them!
I think that people will buy them, just not enough to get them into stores. Online distribution allows for small volume manufacturing.
I just e-mailed my mom. If I can get her to make me one and it’s as awesome as I think it is, then there will exist a pattern and a prototype.
I think the level of prejudice is so high that you’d need a good bit of money and a lot of dedication to do it on the large scale. I keep thinking it would take ten million dollars to start a mass production clothing company, but this is only a guess. Does anyone here have a well-founded estimate?
As for the smaller scale, here’s some of what’s going on. If you’re not up for starting the big company, you might find a small business which is worth investing in.
How sure are you that fat women won’t shop at a places that offer good clothing only for fat women? My first thought was that your theory is nonsense, but then I realized I’d been reading fat acceptance material for so long that I don’t really know.
Maybe it’s just that the hypothetical business would need to advertise.
Those websites have some pretty things. (Including items I wouldn’t expect to be marketed to any size in particular—really, scarves?) I wonder how large-scale a movement towards the availability of pretty clothes for plus sizes would need to be before large, pretty clothes started reliably being available in thrift stores? (I have been spoiled by $3 garments and wince whenever I look at retail prices -.-)
The link is broken, I’m afraid—try this one;
http://nancylebov.livejournal.com/423572.html
Thanks. I’ve corrected it.
Another possible example: sperm vs. egg donation.
I have very wide feet, which significantly limits the kind of shoes I can buy. This is particularly bad, since shoes on men are a major status signal and, to women, an attractiveness signal. Also, I cannot change my foot size without surgery.
My pity party is located at ____?
I’ve never heard of significant prejudice against people with wide feet, though it’s possible that they represent a somewhat neglected market.
I was very angry at your pity party comment. I don’t come to Less Wrong to be trolled. I probably should have either not replied to you or waited until I’d calmed down before I replied. (Downvoting your comment seemed too petty, and I’m not one of the people who did it.)
Instead, I deliberately ignored some of what you said.
I was attempting to deal with my own emotional state, and had no idea you’d react so strongly. It’s possible that something similar might be true of your post.
I apologize; I didn’t recognize that my comment was over the top. My comment probably wasn’t relevant in light of the article, either.
I also admit that you are right about the issue carrying emotional weight for me; I get a bit impatient at repeatedly hearing about the latest poor/pitiful group du jour, who inevitably has it even better than me.
Let me clarify. Although people with wide feet may not suffer much direct prejudice, they nonetheless suffer effective prejudice indirectly because it hurts my ability to signal via e.g. choice of shoes, as I pointed out in my earlier comment.
Have you heard of prejudice based on shoe quality and uniqueness, which would be difficult to achieve for someone who has a non-standard foot aspect ratio?
(Maybe I should have said something in my initial comment about how having wide feet affects shoe selection? I mean, something else.)
Request for pity party location remains.
I find it hard to interpret your request for information about a pity party for men who have trouble finding wide shoes as anything other than an attempt to be annoying.
I’m curious about why you’re describing any of the material posted about clothing for fat women as a pity party.
As for you and shoes, under normal circumstances, you’d have my sympathy.
So far as I know, the relative rarity of wide shoes is the result of either a rational estimate that it’s harder to make money selling unusual sizes, or a not quite rational lack of effort to notice a business opportunity.
On the other hand, it’s a common belief that if fat women had access to good clothing, they’d have less incentive to lose weight.
Because I’m being asked to pity them? Yes, the comments are nominally phrased as, “Oh, here is a possible case of people being biased even when it would pay not to be”, but the obvious tone is, “poor women, no one will make clothes for them even when there’s money to be made”.
And frankly, when the asymmetic bra issue came up, I got pretty scared. Some of the commenters—and I’m not going to single anyone out—sound like really angry people in general and I fear that being around them would make their rage spill on to me.
They have this entitlement mentality, where everyone has to make clothes that they like. I think it’s what motivates a lot of the crime against retailers.
I mean, how dare they make clothes for other people, right?
(Btw, if it matters, there is a relatively large market for wide shoes—I read an article that it’s an issue for Native Americans, and Nike has a shoe line for them, but won’t sell to non-Native Americans. Go fig.)
Also, are you going to take back your pretense of ignorance about shoe prejudice?
That’s a plausible motivation. But use of the term “pity party” could have implied that you were trivializing the concerns of fat women, which is probably why you got downvoted. Really, I think you were just trying to add another, similar concern: people with wide feet. If you’d just said “people with wide feet have a similar problem,” I don’t think you would have gotten a negative reaction.
I don’t share this perception.
“Pretense of ignorance” sounds like you are making an accusation of bad faith.
I hate watching you make good points that get downvoted because of the emotional or interpersonal content in them.
Rather than try to fix everyone’s thought processes on the spot, I prefer to instead demonstrate a rational thought process myself (with an interpersonally likable communication stye), in hopes that people will want to embody or engage with this sort of thought process. Pull, rather than push.
I am trivializing the concerns of fat women! Or rather, I’m showing them what they look like to people with higher status, by highlighting their perception of my concern, which society trivializes. How did fat women feel when I started whining about my wide feet (which I do have)? Well, that’s how society regards them.
Hopefully, it sheds some light on why society ignores your concerns, when you realize they’re just doing what you would do in the same position. (you in the general sense)
I would love for my fashion problems to be solvable with exercise, or even by saving up for liposuction. What’s their excuse?
The real difference is that fat women have turned self-pity over their fashion woes into an art form, while wide-footed people haven’t.
Good. It was satire to make a point. The people who are being mocked know who they are.
I hope so! Here’s what happened:
Me: I have wide feet, which makes me unable to buy an item important for attractiveness. Why no sympathy for me?
Nancy: Huh? I don’t see any prejudice against people with wide feet!
Me: Like I just said, the wide feet cause inability to compete on shoe quality, where people do have prejudice.
Nancy: [ignores the point in reply]
Me: Wait, what happened to the “I don’t see any prejudice” line?
You: *Gasp!* Did you just accuse Nancy of acting in bad faith? How dare you!
Weirdly enough, fat women really already understand how their concerns look to people with higher status. Why did you think it was important to underline this?
You could solve your problems with money—and no risk to your health—by getting custom made shoes.
Because I don’t think they do understand. They don’t give a damn about the people one rung lower on the social ladder, and they’re surprised when the people on the rung above do the same? The answer’s staring them in the face! (or mind, as the case may be)
And fat women could just buy custom made clothing. That’s not addressing the point, is it?
Late to the party… but I don’t actually see self-pity here.
This is the same old thing that starts all the fights around here: the old PC/anti-PC thing. Should we yell at fat people or give them pretty clothes? It’s tiresome. It’s all heat and no light. We’ve all got a right to butcher sacred cows… but now can we add something to the discussion?
What was interesting here was the notion that something like an implicit sumptuary law might be going on; a product that people would and could buy is not widely available because of a moralistic belief. (In this case, that inadequate clothes are a fit punishment for being fat.)
That’s a hypothesis. But nobody from here on out was actually engaging with the hypothesis. It’s all yay/boo stuff. Man, can’t we do better?
Sorry, guess I hit a little too close to home there… still, any non-obvious downvote rationale (for the entire thread) would be appreciated, via PM if necessary.
On a substantive level, I’m confused about what point you’re making. Are you suggesting that shoe manufacturers are biased against people with wide feet, in the same way that Nancy suggested that clothing manufacturers are biased against fat women? Or are you suggesting that neither situation represents that sort of bias or prejudice, and that alternate explanations should be sought?
Like Nancy, I’ve never heard of significant general societal prejudice against people with wide feet, so that’s part of why I don’t understand exactly what parallel you’re trying to draw.
Also, with respect to this quote:
Like HughRistik, I don’t share your perception. And with respect to this quote:
This struck me as pretty close to trolling, since I don’t think it’s a big inferential step to take that as suggesting that the unnamed “angry” commenters that left you “scared” might end up committing such crimes.
And like Nancy, you didn’t finish reading the comment! Again: people judge others based on their shoes. People with wide feet are unable to buy fashionable shoes because their options are so restricted, and virtually all shoes are made to fit people with normal feet.
Of course people don’t discriminate against wide feet per se; they do, however, discriminate on the basis of the inevitable result of having wide feet.
Does it make sense now?
Would you consider it trolling for someone to say this (reworded to obscure origin; comes from an actual LW comment):
Because that logic is just as tenuous … and makes a more serious accusation. For those who have made such comments—and some are probably reading—I hope they get the message.
I did read your whole comment and I understand that you were making the point that men with wide feet face indirect prejudice because they can’t buy fashionable shoes and society judges people on their fashion choices. What I didn’t understand was how that point related to the issues of manufacturer bias and incentives originally being discussed in the thread.
Nancy’s original post was to the effect that the lack of clothing choices for fat women reflected a bias (among clothing manufacturers and more generally) against fat women, and that this bias resulted in the manufacturers ignoring what could be a lucrative market. (Several people who commented on the thread posted interesting ideas suggesting why such bias was probably not the whole story.)
When you made your first comment in the thread, I thought it was possible that you were making a related comment about the biases (or lack thereof) that influenced manufacturers of both women’s clothing and men’s shoes. I initially misunderstood your comment in that I thought that by highlighting this other failure to meet market demand (for wide fashionable men’s shoes), you were suggesting that there are all sorts of such failures, and ascribing these failures to some prejudice in society missed the mark.
When Nancy asked about bias against people with wide feet, and you described the indirect route by which such people experience bias, I realized that I may have misunderstood your point. I continued to not understand exactly what point you were making until you expanded on it in some of the other comments in this thread. I now understand that your comment was something to the effect that men with wide feet suffer indirect prejudice because they can’t have fashionable shoes but they aren’t throwing a “pity party” about this situation the way that fat women are.
I guess the reason it took me so long to understand this point was that it was sufficiently tangential to the main points being discussed in the post that I just didn’t leap there immediately. I was particularly confused because it seemed like you ignored the opportunity to make a post that discussed a failure to meet market demand that could not be ascribed to prejudice, which would therefore provide some evidence that at least part of the explanation for the failure in plus-size women’s clothing is also not due to prejudice.
(That being said, I don’t know if you can wear ordinary wide-size men’s shoes or if you need wider shoes than that, but for athletic shoes, I know New Balance carries wide sizes, and for other shoes, Cole Haan does. I’m not an expert on fashionable men’s shoes, but Cole Haan seems fashionable to me. You might also try Zappos, which gives you the option of searching by width.)
Moving on to the other question, the main reason I perceive you as “trolling” was that I am familiar with the longstanding issues between you and Alicorn. (I suspect that most regular Less Wrong readers who have been here for a sufficiently long time are similarly aware of those issues.) You engaged in behavior that I would deem “trolling” or perhaps “passive-aggressive” by making these comments:
I looked through the asymmetric bra sub-thread, and despite your reference to multiple commenters and assertion that you would not single anyone out, it is hard to come up with any other idea than that you were indirectly baiting Alicorn, the instigator and main proponent on the asymmetric bra issue.
Moreover, when HughRistik indicated that he didn’t perceive the anger on the issue that you described, you responded:
And again, the most reasonable interpretation is that you were baiting or mocking Alicorn here.
Which brings us to your question:
Given the rest of the thread, it will probably not surprise you to know that I was able to discern that the author of the original comment was most likely Alicorn. Alicorn’s actual comment was:
The context was that the “product” being sold was oneself as a sexual partner. So, if you don’t mind, I’m going to address whether I consider the actual comment made by Alicorn to be trolling, rather than your translation of the comment presented without context. And whatever flaws that comment might have, I wouldn’t consider it trolling.
I don’t read the comment as directed at anyone personally (as I read your comment to be designed to bait/mock Alicorn), although perhaps you disagree on that point. I don’t think it’s designed to mock or bait more generally either. If you have evidence that the comment was directed more particularly at you or other LWers, or was intended to mock or bait, I would be interested in seeing that evidence.
On the other hand, I agree that the rhetoric might be somewhat over the top. The use of “scares the crap out of me” may be too much. I personally don’t read it to suggest that the sort of thinking described inevitably leads to evil behavior in every person who has such thoughts, although perhaps that reading is debatable. Softening the language to make that point more clear may have improved the comment’s palatability.
But my ultimate conclusion is that it’s an interesting point, worthy of debate, and indeed it resulted in a long, involved, and more or less productive discussion. So no, not trolling.
I feel very bad—to the point of being sick—at having diverted the thread on a tangent in a way that upset posters, and I wish I hadn’t said anything beyond the comparison to the wide feet issue. Fortunately the thread is hidden by default
Still, even in my worst moments I never cease to be amazed at how others react.
I wish to draw your attention to two parallels you might have missed:
The non-troll you refer to only provoked a productive discussion in the first place because the non-troll’s dictates were ignored. Alicorn had previous told me (completely unjustifiably) not to reply . Had I actually followed this demand, there would be no productive discussion for you to defend in characterizing it as not trollish.
Making provocative remarks that you expect the target won’t be able to reply to … isn’t that what you were just criticizing me for?
Second, my remark and Alicorn’s are similar in that both make a ridiculous accusation of criminality—and trivialization as simply angry people—against a group simply because they criticize a practice. Yet only in one case do people see—do people want to see—why the accusation is absurd.
(By the way, how’d you find the original thread? Have help? I hope it wasn’t from someone who’s also presenting you with arguments I don’t even get to see, let alone reply to—that would be kind of petty.)
I appreciate your offer of help on wide shoes.
Thank you for taking all this seriously.
Something I noticed in going over this thread is that both you and I saw we were dumping hostility in each other’s general direction, and the other posters mostly didn’t.
In fact, what I did in ignoring the main point of your initial post was so subtle that I could hardly see it when I reread, even though I can remember how angry I was when I did it.
Weirdly, being emotionally involved in a quarrel led to more accurate perceptions rather than less.
I will note that other posters, to the extent that they noticed that I hadn’t replied to your point, made excuses for me. No one asked me what I had in mind.
It’s a embarrassing to admit what was actually in my mind, but the truth may be of some use. From my point of view, you’d just infuriated me by dismissing something I take seriously (prejudice against fat people [1]), and then seemed to expect me to take your concerns seriously. I wasn’t modeling you in any detail, I was just determined that you weren’t going to get what you wanted from me. I wasn’t thinking about how much you wanted it, or how you were likely to react.
Tentatively offered: Your angry posts here and in the discussion about women failing to give clear signals seem to me as though they’re based in a premise that there isn’t enough sympathy to go around, and therefore less of it should be given to unworthy objects.
I think high status people can make that one stick, but getting more sympathy is more likely among equals if a “sympathy is easy and good” atmosphere is promoted.
Even if this is true, making it useful would be a non-trivial task.
[1] I have some concern for prejudice against fat men, too.
You’re right: sympathy, in terms of the emotion, is not zero sum, and I should not proceed in discussions and engage others on the basis that it is.
Still, what resources we expend because of our sympathy are limited, and so I don’t think you appreciated how good fat women have it relative to other worthy targets of sympathy. Short men, for example, don’t even have the option to save up for a safe operation that tallifies them, while fat women at least have the option of liposuction. (And, while we’re at it, they probably got dating experience effectively for free sometime in their lives, if you really want to count woes and blessings.)
In bringing up wide feet, I was also (albeit rudely) hoping to provide insight onto why people might be so indifferent to the plight of fat women. If you can roll your eyes at someone who has wide feet, then I think you can better appreciate why people would roll their eyes at the complaints of fat women, because the same dynamic is at play.
Again, my bringing up the matter was woefully off topic, and I can understand now why it was hard to see my point—someone actually wanting to contribute to the discussion wouldn’t see where it fits in. I apologize and deeply regret raising the issue.
There are leg-lengthening procedures; this study showed a 4% rate of major complications, which doesn’t seem that unsafe.
Not one of the downvoters, but the tone of these paragraphs was so overcooked I did consider it for a couple seconds:
Those words and your presumptuous ‘are you going to take back your pretense of ignorance about shoe prejudice?’ question came across to me as quite obnoxious.
Did you find it obnoxious when Nancy outright ignored the part of the comment where I explained why having wide feet would lead to others being prejudiced against you? Or just the fact of me mentioning this ignoranc … er, “act of ignoring”.
This is what always gets me: no one cares when someone doesn’t read a comment and yet still replies to it—well, to a version of it. Yet when someone points out the rudeness of doing so—well, then that person’s just a terrorist!
What gives? If you’re going to criticize just one of those two, which one has priority?
Neither. I found the manner in which you mentioned it obnoxious, not the mention qua mention.
You are mistaken. I’m not objecting to your pointing out that NL didn’t acknowledge your comment as you wanted her to. I’m objecting to the claim that she replied with a ‘pretense of ignorance.’
The one that employs immoderate hyperbole and launches an ill-grounded accusation of ‘pretense’ at someone else.
Just so we’re on the same page, could you please give an example of things I could have said instead for this comment, which you would not find obnoxious, but which would point out the rudeness and error on Nancy’s part?
I don’t think I’m capable of answering that question, since I’m not seeing the ‘rudeness’ in the parent comment posted by Nancy to which your linked comment replies. At any rate, I didn’t find that particular comment of yours obnoxious except for the ‘pity party’ snark, which I basically just wrote off as your usual level of prickliness.
The rudeness is in how she completely ignores the explanation I just gave in the parent comment, of why wide feet would lead to people being prejudiced against you, which obviates her question (the one I replied to and, in doing so, was deemed obnoxious).
So:
1) I explain why having wide feet leads to people being prejudiced against me.
2) Nancy replies, while ignoring the entire explanation I just gave.
3) [Insert comment I should have made instead of the one I did, which would point out how Nancy just ignored the explanation I gave, but which you don’t characterize as obnoxious]
The reason I belabor the point is that this issue comes up quite frequently, where people complain that “Yeah, Silas, you had a good point, but goshdarnit, the way you said it gives me sufficient pretense to ignore it wholesale and join the anti-Silas’s point bandwagon”, and I want someone to finally put their neck out and show me what comment would be an appropriate one to protest the (rude) ignoring of part of my comment when someone replies to it.
There’s no explicit question in the comment of NL’s I think you’re thinking of, so I imagine you mean that the statements in her comment could be read as implying an already-answered question, which makes the comment rude. That hardly registers on my rudeness detector; unless it’s part of a systematic pattern of behavior, it’s innocuous IMO.
Still, let me pretend I’m SilasBarta and suppose her comment is rude.
OK, I’m SilasBarta. Nancy’s replied to me. Most of my comment seems to have gone right past her and she’s replied without having understood me. That means I have failed to make myself as clear to her as I’d like, and I want to fix that. It’s her first reply to me, she’s not being overtly confrontational, and people often write sloppily when replying to others on the Internet, so let’s assume good faith. As such, I reply to emphasize my more detailed explanation of how people with wide feet suffer prejudice, this time without any snitty rhetorical questions (or accusations of bad faith). I might write something like: ‘Let me clarify. Although people with wide feet may not suffer much direct prejudice, they nonetheless suffer effective prejudice indirectly because it hurts my ability to signal via e.g. choice of shoes, as I pointed out in my earlier comment.’
I don’t believe I did use the way you said what you said as a pretense for ignoring its good points. I do think you might have been right when you tried picking out the pity-oriented subtext of NL’s original post, but just because I didn’t mention it doesn’t mean I ignored it wholesale—it just means I didn’t have anything to say in response to it. There are a lot of comments on Less Wrong that make good points—presented abrasively or otherwise—that I don’t reply to. (Also, I wouldn’t even have complained to you if you hadn’t solicited feedback on why people had voted down your original run of comments.)
Done. I’m looking forward to either Nancy’s substantive reply and apology, or your concession that the issue might be a bit more complicated.
Okay, but the part Nancy ignored when she replied bore directly on (and obviated!) her comment, so she shouldn’t have replied to begin with if that was all she had to say. The general point of yours (which I agree with) about the impossibility of replying to everything, doesn’t apply.
It seems to me that the issue’s already been complicated because you’ve already replied to Nancy impolitely. Now that’s happened, it is not really realistic to expect a substantive reply and apology from her simply because you (I, if we’re being pedantic) rephrased some of your original remarks more tactfully.
OK; it sounds like I misinterpreted your earlier comment about ‘people complain that …’ as being directed at me, but based on your reply it sounds like it isn’t. In which case feel free to disregard the last paragraph of my grandparent comment.
Criticizing someone for (the perception of) being mean or otherwise anti-social generally has higher priority than criticizing someone for (the perception of) being wrong.
In human social interaction, it’s considered worse to be mean than to be wrong, unless you are wrong in a socially proscribed way. Social order is considered more important than everyone being right all of the time.
I wasn’t criticizing Nancy for being wrong; I was criticizing her for ignoring part of what someone said. That counts as being anti-social too, so it’s not an issue of “wrong vs. anti-social”; it’s anti-social vs. anti-social.
So, why is the anti-sociality of ignoring someone’s comment while pretending to reply to it worse than the anti-sociality of saying that someone, er, did that?
Also, would it be rude to point out that you also just did what I’m accusing Nancy of doing? ;-)
Nancy didn’t deal with that point in detail for good reason: simply put, there’s no general prejudice against people with wide feet. it may be that in some circumstances they end up taking a status hit, but no one suffers a status hit for catering to wide-feet people the same way they do if they are perceived as actively catering to fat females. I tentatively suspect that Nancy didn’t reply about this because Nancy considered this to be obvious from context.
How many times am I going to have to explain this? People do have prejudices based on the fashions that others wear, and a major part of this is shoes. Therefore, having such sharp restrictions on what shoes you can wear will amplify this is existing prejudice. Therefore, people endure additional discrimination as a result of having wide feet, even though “wide feet” does not register as a negative quality in and of itself.
I explained this from the very first post where I brought up wide feet!
… yeah. Or, you know, you could just quit coming up with ever-more-contrived theories and go with, “oops, Nancy must have missed that, probably should have been more careful.”
Let’s put issues with Nancy aside for a minute. Do you agree with my statement that “No one suffers a status hit for catering to wide-feet people the same way they do if they are perceived as actively catering to fat females.”?
Let’s put the store-side issue aside for a minute. Do you agree with my contention that, “A man with wide feet will look less fashionable—irrespective of any fashion sense he might have—as a result of not having access to the variety of shoes that people with normal feet have?”
Why does your question have more importance for this issue than mine? And why do people get to ignore the reasoning I give with impunity when replying to me?
I’m not sure I agree with that. It seems plausible but I’m not sure people pay that much attention to shoes or for that matter to how “fashionable” people are dressed (there’s a necessary disclaimer here that I’m a math grad student. It might very well be different if one were talking about more status and signaling conscious professions like law and business.)
Because a yes answer to my question would imply that whether or not the answer to your question is “yes” the status issues being discussed in regards to clothing for fat people is not what is causing a lack of shoes for wide-footed males.
How justifiably confident can you (JoshuaZ) be about the impact of shoes on someone’s fashionability and the resulting prejudices people have on that basis? Like you say, you’re a grad student, with little real-world experience in this. Everything I’ve read about the matter says that the shoes men wear do matter.
But why would it have that impact? Fat women can, introspectively, understand why they don’t give a shit about helping wide-footed men, and why they’d take a hit to status if they did so. They are surely capable of inferring therefrom why higher status people don’t want to take a hit to help them out.
Very low confidence. Hence my remark that your claim seemed plausible.
Missing the point. No one is going to take a status hit from helping out wide-footed men. People might get a status hit for helping out “people with crappy shoes” but that’s not the same category. Close to no one has the same negative status association of “wide-footed men” that they have with “fat women.” That’s the distinction. Let’s say you’re at a cocktail party. Which do you think we’ll have a larger negative status impact when asked what you do for a living? “Oh, I’ve started a company that makes clothing for fat women” or “Oh, I’ve started a company that makes shoes for men with feet that are wider than the norm?” These don’t have the same status result. And if you want to make it more stark, imagine a male who works as a model for wide-footed shoes as opposed to a female who models clothing for fat people. Which one do you think will cause more of a status hit on a random internet forum if an otherwise anonymous individual mentioned that as their job?
I don’t know, but it must be pretty big of a hit for the wide shoe model, since, um, there aren’t any.
But not the relevant distinction. If I show up at that cocktail party, all people know is that I have crappy shoes. And no, I can’t just say to them, “Oh, discount this aspect of me: I have crappy shoes because they don’t make them in my size; really, I totally get that nice shoes are important, I just can’t find any that fit.”
It doesn’t work like that.
Framing effects would dominate. What if you said, “wide variance women” instead of “fat women”? Or “men that are underserved in the high end shoe market” instead of wide-footed men?
Again, the only real difference is that fat women have made self-pity into an art form, while wide-footed men haven’t.
Let me tentatively suggest that in that circumstance framing would not dominate. In the first case many people would after hearing “wide-variance” be thinking “oh, he means fat ladies” or something similar and would only not say that explicitly out of politeness, whereas even if you said the second one without the framing, most people would ignore it.
Is this the relevant distinction? It seemed like the topic of discussion was why there wasn’t any clothing of specific forms. That’s not the same question as whether or not status hits occur to the people in question. (And even then, if one is talking about say just online conversation, a status hit from being a fat woman is going to be much larger than “I’ve got wide feet.”).
Let me tentatively suggest that the level of status issues here is so different that the difference of degree really does become a difference in kind. Indeed, our earlier discussion sort of highlights this. Even in situations like academia, where looks don’t matter that much, being a fat woman seems to have some status hit associated with it.
-- Kahneman & Tversky (1986), Rational choice and the framing of decisions, pdf
If you’re making a judgment using a process that would become more accurate (less biased) with more attention, effort, or thought, then incentives could help. And if you have some awareness that you’re biased (including the direction of your bias), then incentives could help reduce that bias by giving you the motivation to try to correct it. But otherwise they won’t be much help. As with a visual illusion, you don’t realize that your intuition is faulty, or that you’re being influenced by a framing effect, or that you’re relying on a biased set of information, or whatever, so the bias will remain. And sometimes incentives can make things worse, like if more thought gets you stuck in a rut that makes it harder to switch strategies.
One example is anchoring (pdf). Incentives reduce the bias from anchoring and adjustment, since they get people to think more and continue adjusting farther away from the anchor. But when “anchoring” effects result from the “anchor” bringing to mind a biased set of information, then incentives don’t help.
I’m going to bounce a theory off you guys: the reason sports and entertainment have integrated faster than finance is because people care more about sports and entertainment.
I consider entertainment to be a field with a substantial degree of objective measurement because people are good at telling whether they’ve been entertained.
What is meant by “integrated” in this context?
People choose entertainment for basically the same reasons they choose political opinions or other beliefs: social pressures, being part of a team. Entertainment has objective measurement because people directly change what it is that’s being measured.
If I decide that Iraq has weapons of mass destruction because I like the team that says so, I’m still wrong. If I decide that Nickelback is entertaining to me because people around me say the same thing, I become correct.
I don’t have high hopes for CEV, but I hope that humans at least converge on the obviously correct preferences to avoid hot pockets and Nickelback whenever possible.
(I think I became slightly infamous at Benton house for insisting that certain preferences could be objectively correct under any reasonable amount of reflection. This was mostly because something deep down in the core of my being knows that liking hot pockets just has to be fundamentally irrational. This is indicative of the depth of most of my philosophical intuitions.)
But I like the two Nickelback songs that I’ve heard.
:) I’ve never actually listened to Nickelback, but ignorance will never keep me from trolling.
That doesn’t make hating Nickelback any less fashionable.
....I hate Nickelback. : 3
I agree, it is rational to think that some things “just have to be” “fundamentally irrational”.
Not always. Sometimes you become dreadfully unhappy.
But in many cases the point stands.
I would expect things like being a cognitive miser or beliefs one professes for signaling to go away under strong enough incentives, but not mindware gaps.
The difference is that in some problems people just have no idea how to get the right answer (eg talking sanely about GAI), and in other problems, they choose not to for some reason (eg it sounds better to say that you’re a better than average driver than a worse than average driver)
I’ll just put this here:
http://www.youtube.com/watch?v=u6XAPnuFjJc
The candle problem may be one of the background ideas which contribute to the belief that large incentives don’t change biases, even though it’s a loose connection—it shows that incentives reduce creativity.
I think I’ve found the source of the meme here Dan Pink on the surprising science of motivation.
I’m not sure it quite proves everything it wants to prove—big rewards do induce creativity among scammers, even if it’s mostly variations on a few themes.
A lot of creativity went into creating the financial crisis—I’m not sure how much of it was deliberate fraud, and how much was people not wanting to think about the consequences of behaviors which could lead to big rewards for them.
I know about the motivation science stuff. But that’s very much distinct from debiasing.
When you want to get new complex behavior, there’s a lot of evidence that it can be shaped with small rewards for changes which more and more closely approximate the new behavior.
This is very different from a great big reward for something which is way out there in possibility space.
This may be a variation on loss aversion—most people aren’t willing to put out a lot of effort unless they’re sure of what they’ll be rewarded for.
Natural financial (and non-financial) incentives, by which I mean those incentives that are part of the model in which you’re observing bias, do probably reduce bias, by letting less-biased actors win more. Artificial incentives from outside the model can alter behavior, but not directly change the rationality level.
Many biases are self-serving enough that they’ll alter to match the behavior that outside incentives cause. I’m not sure that counts as a reduction in bias, or just a shift to biases that the incent-or prefers.
The most obvious example of incentives overcoming bias (in the colloquial sense, which I think includes the sense you mean) is blacks and sports in the US. It eventually became clear that excluding excellent athletes didn’t make financial sense.
Do you have some objective method to determine biasedness and usefulness of the answers?
I think Vassar made this argument (incentives do not fix bias) based on the assumptions that
markets are irrational
markets are irrational because of participant’s biases
markets would not be irrational even if few big-money people were not biased
The standard response to claims that markets are irrational is ‘so why aren’t you rich?’. Maybe Vassar is? I think the Efficient Market Hypothesis is flawed but that still doesn’t mean that markets are so irrational that you can easily make money by exploiting their irrationality.
This is actually what finance professors say. “Strong EMH” is what you mean by the Efficient Market Hypothesis. “Weak EMH” is the claim that you can’t systematically exploit market irrationalities to make money. Weak EMH has actually held up pretty well.
What the weak EMH should say is that “retail investors can’t systematically exploit market irrationalities to make money.” That definition holds up well, even in the case where the retail investor hands his money to a professional money manager. There are 10s of thousands of professional traders who make their living exploiting market irrationalities. I’m one of them. The weak EMH doesn’t apply to us. We are the ones who make sure that it applies to you!
I have a hunch that even the weak version is overstating the case somewhat and that you might even feasibly be able to provide evidence for this by examining the distribution of wealth among investors. This would be difficult due to problems with collecting an appropriate data set, figuring out exactly what distribution the weak EMH should actually predict and what kind of statistical analysis you could use to demonstrate a difference but I suspect one exists.
Essentially my hunch boils down to ‘there are more Warren Buffetts and Hugh Hendrys than even the weak EMH would predict’. Most tests of the weak EMH merely purport to show that on average investors don’t outperform benchmarks which I think is more or less accurate. I suspect there are more consistent winners (and balancing consistent losers) than it would imply however.
There’s a strong case for the weak EMH, in that managed funds consistently underperform index funds. Some managed funds outperform in a given year, but the can’t reproduce these results year by year, implying that they just got lucky.
This well known result does not contradict my claim. Neither of the examples of possible consistent market beaters I mentioned run managed mutual funds and I would not expect to find many such people running managed mutual funds. I would expect them to mostly be running hedge funds (like Hendry), investing for themselves or using regular companies as investment vehicles (a la Buffet).
Even with actively managed mutual funds the evidence you present does not directly contradict the possibility of genuinely skilled management. There is strong evidence that actively managed funds do not outperform the market on average and fairly strong evidence that past performance is a weak predictor of future performance (suggesting luck more than skill is the explanation for outperforming benchmarks in most cases) but the data does not rule out true alpha) in the tails of the distribution. In fact, I just found that Fama and French are explicit about evidence for this existing:
and/or that they use bad incentives. public held corporations usually get outperformed by family owned entities due to better long term planability. Even Managers optimize for whatever they get payed by.
Really? Robin linked to a paper suggesting that firms floated on the stock markets have better management than family-owned firms.
As I recall, Robin also linked to a paper pointing out that very large companies underperform. Family-owned firms tend to not become that large; I wonder if that undoes the going public effect.
We may be running into problems with the ambiguity of ‘outperform’; clearly dis-economies of scale aren’t going to allow family run firms to become larger than public ones, for example.
There are people who make money off of, say, arbitrage against foreign currencies. Someone has to be keeping the rates in line when they go off slightly. The problem is that you need huge amounts of capital to do this effectively, so it’s limited to institutional investors.
I think that maybe there is an analogous pair of statements for contrarian viewpoints.
The “Strong anti-contrarian hypothesis”—the world contains no severe commons problems and is generally being run rationally and well
The “Weak anti-contrarian Hypothesis”—there are no opportunities for an individual or small group to actually benefit from (or even stand a non-negligible chance of succeeding at) solving the severe commons problems and irrationalities that we do have.
E.g. It takes a mere smart person to realize that spending $10^10 on designing new kinds of lipstick and spending $0 on curing aging is not a sane allocation of effort.
But if you try to actually correct that failure, you end up locked away in an underfunded lab on a shoestring budget, poor and ridiculed by the very people you’re trying to help, who go on with the old plan whilst deriding your publicly as immoral and selfish.
Bitterness doesn’t help anything. If publically declaring yourself wanting to save mankind and looking for support doesn’t work, pivot and find some other way to achieve your goals.
If the problem is that people can’t process the complex chain of logic necessary to understand existential risk, work on IA. Start on working on fixing certain types of brain disease that you think might be beneficial for the rest of humanity as well. For example my brain feels tired after certain activities, and I don’t like to think. Why? Is it because I have depleted some nutrient in my brain chemistry? Can this be regulated in some fashion. This must be a chronic problem for some people, so you might be able to get funding.
Or in other words don’t go on this path..
Be careful not to use “bitterness is bad” as a way to indulge in anti-epistemology, e.g.
“If I thought that humanity doesn’t care about its own future, then I’d be bitter, and bitterness is bad, ergo humanity does, in fact, care about its own future”
Negative emotions are to me a warning sign, not to avoid some truth, but to uncover some falsehood.
That was really well stated.
Did my response look like that? I was trying to convey the idea that you can use existing factors in society to achieve the goals you want, even if humanity doesn’t care about the goals. In the first case it was leveraging disease prevention and then relying on the use of medical technology for self-enhancement that has happened previously (which I elided).
The benefits of following that path is determined by how much you think that people not being interested in existential risk reduction is due to their brains shutting down when people talk to them about it and how much you think it is due to conflicts with their other interests. I’d guess a little of both, but probably more interests. That we have lots of smart people here, suggests that there is something in humanity that can become interested in existential risk reduction given sufficient brain power. So I wouldn’t expect a vast awakening, but I think it would help the cause.
To give another example of how you might achieve your goals even if society doesn’t share them. Take aging, if Aubrey de Grey could get some of his proposed techniques to work on just the skin of humans and actually keep skin healthy and young (even while we degrade on the inside), he would get mountains of cash from the many women who want to keep looking young. Admittedly he couldn’t muck around with marrow and things (I forget his exact plans), but he should be able to do better than the current “anti-aging creams”. Then he needs to find another group of people that want to keep their muscles young (men?). And do it piecemeal.
At no point relying on people wanting to live forever. Think sneakier :)
Sure, I agree with the principle of using whatever resources are available to achieve whatever your goals are. It’s just important to keep background facts “clean”, i.e. not skewed by what your current near-term goal is.
Yes, but “humanity cares about its own future” is such a vague statement that you can accurately believe it either way, depending on how you interpret it. So I don’t see anything wrong with interpreting it so as to be less bitter.
^ Anti-epistemology ^
Right, and my position is the strong pro-contrarian hypothesis. There are visibly countless opportunities for extremely but boundedly irrational individuals to benefit from solving commons problems, therefore almost no-one is extremely irrational but boundedly so for an extremely permissive bound, almost everyone is even more irrational than that.
One of my best data-points is that so few people did the obvious and invested in Buffett once he had the best track-record of any other investor 35 years ago. With some leverage, any such people who started out with reasonable investments could be billionaires today, and if many existed he would have been swamped with funds and unable to continue to overperform. Why would rational people who give their money to a money manager give it to one who didn’t have the best or almost the best track record. Yes there are reasons, but not plausibly for the number of people who didn’t buy Berkshire.
Do you have any theories about why so many people didn’t invest in Buffett?
Any chance that if Buffett had been swamped with money, he would have rethought his strategy and come up with something useful for the changed circumstances?
If you think of any of other amazingly good investment opportunities like that, let me know ;-0
In fact, what opportunities are there for a high-rationality person to both solve a commons problem and benefit from it? Smart speculation and venture cap is one place I can think of, but you have to already be a millionaire.
For myself, to even get to that level, I’m going to have to go slug it out in finance for a decade.
The standard response to that is “the market can stay irrational for longer than you can stay solvent.”
also, in my case
What historical rate of return on investment = rich?
It’s a nice line but I think if being more ‘rational’ than the market causes you to lose all your money then you’re doing ‘rational’ wrong. Rationality is supposed to be about winning, not about being ‘right’ but broke.
Consistently displaying positive alpha over 5+ years would be indicative of some genuine investment skill. Some top hedge fund managers seem to be able to do this but it is a pretty rare level of talent.
12+% with lowish volatility for 5 years would be impressive, especially if it’s compounded.
Markets can be irrational even if a large portion of investors are rational. It’s complex.
For one thing, many investors have to find hedged positions (e.g. pension fund managers), and often there aren’t good hedges for mispriced securities. Risk aversion and time discounting make things worse, especially if the irrational investors are more risk-tolerant than the rational ones.
That’s why I mentioned all the assumptions ;)
In practice, just no.
Just no to
If yes, please provide support.
One of Tyler Cowen’s recent books, probably “Discover your Inner Economist” discusses this in depth.
Some other experiments, possibly from K & T, show the same irrationalities among very poor third world residents when dealing with amounts of money that are very substantial to them.
I think Ariely covered some of these experiments in Upside of Irrationality, though the point he was trying to make is that too much incentive is counterproductive (decreases rational behavior).