Most people already have a reason to care about the future—since it contains their relatives and descendants—and those are among the things that they say they care about.
If you are totally sterile—and have no living relatives—cryonics might seem like a reasonable way of perpetuating your essence—but for most others, there are more conventional options.
Most people already have a reason to care about the future—since it contains their relatives and descendants—and those are among the things that they say they care about.
I think that the reason that people say they care about their childrens’ future but actual interest rates set a concern half-life of 15 years is that people’s far-mode verbalizations do not govern their behavior that much.
Cryo would give people a strong selfish interest in the future, and since psychological time between freezing and revival is zero, discount rates wouldn’t hurt so much.
Let me throw out the figure of 100 years as the kind of timescale of concern that’s required.
Interest rates over the past 20 years have been about 7%, implying that people’s half-life of concern for the future is only about 15 years.
This is plain wrong. Most of these rates is inflation premium (premium for inflation you need to pay is higher than actual inflation because you also bear entire risk if inflation gets higher than predicted, and it cannot really get lower than predicted—it’s not normally distributed).
Inflation-adjusted US treasury bonds have rates like 1.68% a year over last 12 years., and never really got much higher than 3%.
Not to mention that even these figures are suspect. There is no single obvious or objectively correct way to calculate the numbers for inflation-adjustment, and the methods actually used are by no means clear, transparent, and free from political pressures. Ultimately, over a longer period of time, these numbers have little to no coherent meaning in any case.
It is true that you have to adjust for inflation. 1.68% seems low to me. Remember that those bonds may sell at less than their face value, muddying the calculation.
This article quotes 7% above inflation for equity.
It comes out at a rate of 4.79% PA if you reinvest dividends, and 1.6% if you don’t, after adjustment for inflation. If you’re aiming to save efficiently for the future, you would reinvest dividends.
4.79^41 = 6.81
So your discount factor over 41 years is pretty huge. For 82 years that would be a factor of 46, and for 100 years that’s a factor of 107.
And I should add that markets are wickedly anti-inductive. With all the people being prodded into the stock market by tax policies and “finance gurus” … yeah, the risk is being underpriced.
Also, there needs to be a big shift, probably involving a crisis, before risk-free rates actually make up for taxation, inflation, and sovereign risk. After that happens, I’ll be confident the return on capital will be reasonable again.
This is all survivorship bias and nothing more, many other stock exchanges crashed completely
I presume that you mean cases where some violent upheaval caused property right violation, followed by the closing of a relevant exchange?
I agree that this is a significant problem. What is the real survival ratio for exchanges between 1870 and 2010?
However, let us return to the original point: that cryo would make people invest more in the future. Suppose I get a cryo contract and expect to be reanimated 300 years hence. Suppose that I am considering whether to invest in stocks, and I expect 33% of major exchanges to actually return my money if I am reanimated. I split my money between, say, 10 exchanges, and in those that survive, I get 1.05^300 or 2,200,000 times more than I invested—amply making up for exchanges that don’t survive.
So are you saying that the S&P returned 1.0168^41 times more than you invested, if you invested in 1969 and pulled out today? Is there a web app that we can test that on?
Levels of concern about the future vary between individuals—whereas interest rates are a property of society. Surely these things are not connected!
High interest rates do not reflect a lack of concern about the future. They just illustrate how much money your government is printing. Provided you don’t invest in that currency, that matters rather little.
I agree that cryonics would make people care about the future more. Though IMO most of the problems with lack of planning are more to do with the shortcomings of modern political systems than they are to do with voters not caring about the future.
The problem with cryonics is the cost. You might care more, but you can influence less—because you no longer have the cryonics money. If you can’t think of any more worthwhile things to spend your money on, go for it.
Real interest rates should be fairly constant (nominal interest rates will of course change with inflation), and reflect the price the marginal saver needs to postpone consumption, and the highest price the marginal borrower will pay to bring his forward. If everyone had very low discount rates, you wouldn’t need to offer savers so much, and borrowers would consider the costs more prohibitive, so rates would fall.
They’re nothing of the kind. See this. Inflation-adjusted as-risk-free-as-it-gets rates vary between 0.2%/year to 3.4%/year.
This isn’t about discount rates, it’s about supply and demand of investment money, and financial sector essentially erases any connection with people’s discount rates.
Perhaps decide to use gold, then. Your society’s interest rate then becomes irrelevant to you—and you are free to care about the future as much—or as little—as you like.
Interest rates just do not reflect people’s level of concern about the future. Your money might be worth a lot less in 50 years—but the same is not necessarily true of your investments. So—despite all the discussion of interest rates—the topic is an irrelevant digression, apparently introduced through fallacious reasoning.
Most people already have a reason to care about the future—since it contains their relatives and descendants—and those are among the things that they say they care about.
If you are totally sterile—and have no living relatives—cryonics might seem like a reasonable way of perpetuating your essence—but for most others, there are more conventional options.
Interest rates over the past 20 years have been about 7%, implying that people’s half-life of concern for the future is only about 15 years.
I think that the reason that people say they care about their childrens’ future but actual interest rates set a concern half-life of 15 years is that people’s far-mode verbalizations do not govern their behavior that much.
Cryo would give people a strong selfish interest in the future, and since psychological time between freezing and revival is zero, discount rates wouldn’t hurt so much.
Let me throw out the figure of 100 years as the kind of timescale of concern that’s required.
This is plain wrong. Most of these rates is inflation premium (premium for inflation you need to pay is higher than actual inflation because you also bear entire risk if inflation gets higher than predicted, and it cannot really get lower than predicted—it’s not normally distributed).
Inflation-adjusted US treasury bonds have rates like 1.68% a year over last 12 years., and never really got much higher than 3%.
For most interest rates like the UK ones you quote there’s non-negligible currency exchange risk and default risk in addition to all that.
taw:
Not to mention that even these figures are suspect. There is no single obvious or objectively correct way to calculate the numbers for inflation-adjustment, and the methods actually used are by no means clear, transparent, and free from political pressures. Ultimately, over a longer period of time, these numbers have little to no coherent meaning in any case.
It is true that you have to adjust for inflation. 1.68% seems low to me. Remember that those bonds may sell at less than their face value, muddying the calculation.
This article quotes 7% above inflation for equity.
It seems low but it’s correct. Risk-free interests rate are very very low.
Individual stocks carry very high risk, so this is nowhere near correct calculation.
And even if you want to invest in S&P index—notice the date − 2007. This is a typical survivorship bias article from that time. In many countries stock markets crashed hard, and failed to rise for decades. Not just tiny countries, huge economies like Japan too. And by 2010 the same is true about United States too (and it would be ever worse if it wasn’t for de facto massive taxpayers subsidies)
Here’s Wikipedia:
Empirically, over the past 40 years (1969–2009), there has been no significant equity premium in (US) stocks.
This wasn’t true back in 2007.
Actually, yes, there is such a web app
It comes out at a rate of 4.79% PA if you reinvest dividends, and 1.6% if you don’t, after adjustment for inflation. If you’re aiming to save efficiently for the future, you would reinvest dividends.
4.79^41 = 6.81
So your discount factor over 41 years is pretty huge. For 82 years that would be a factor of 46, and for 100 years that’s a factor of 107.
This is all survivorship bias and nothing more, many other stock exchanges crashed completely or had much lower returns like Japanese.
And I should add that markets are wickedly anti-inductive. With all the people being prodded into the stock market by tax policies and “finance gurus” … yeah, the risk is being underpriced.
Also, there needs to be a big shift, probably involving a crisis, before risk-free rates actually make up for taxation, inflation, and sovereign risk. After that happens, I’ll be confident the return on capital will be reasonable again.
I presume that you mean cases where some violent upheaval caused property right violation, followed by the closing of a relevant exchange?
I agree that this is a significant problem. What is the real survival ratio for exchanges between 1870 and 2010?
However, let us return to the original point: that cryo would make people invest more in the future. Suppose I get a cryo contract and expect to be reanimated 300 years hence. Suppose that I am considering whether to invest in stocks, and I expect 33% of major exchanges to actually return my money if I am reanimated. I split my money between, say, 10 exchanges, and in those that survive, I get 1.05^300 or 2,200,000 times more than I invested—amply making up for exchanges that don’t survive.
So are you saying that the S&P returned 1.0168^41 times more than you invested, if you invested in 1969 and pulled out today? Is there a web app that we can test that on?
Levels of concern about the future vary between individuals—whereas interest rates are a property of society. Surely these things are not connected!
High interest rates do not reflect a lack of concern about the future. They just illustrate how much money your government is printing. Provided you don’t invest in that currency, that matters rather little.
I agree that cryonics would make people care about the future more. Though IMO most of the problems with lack of planning are more to do with the shortcomings of modern political systems than they are to do with voters not caring about the future.
The problem with cryonics is the cost. You might care more, but you can influence less—because you no longer have the cryonics money. If you can’t think of any more worthwhile things to spend your money on, go for it.
Real interest rates should be fairly constant (nominal interest rates will of course change with inflation), and reflect the price the marginal saver needs to postpone consumption, and the highest price the marginal borrower will pay to bring his forward. If everyone had very low discount rates, you wouldn’t need to offer savers so much, and borrowers would consider the costs more prohibitive, so rates would fall.
They’re nothing of the kind. See this. Inflation-adjusted as-risk-free-as-it-gets rates vary between 0.2%/year to 3.4%/year.
This isn’t about discount rates, it’s about supply and demand of investment money, and financial sector essentially erases any connection with people’s discount rates.
Point taken; I concede the point. Evidently saving/borrowing rates are sticky, or low enough to be not relevant.
Perhaps decide to use gold, then. Your society’s interest rate then becomes irrelevant to you—and you are free to care about the future as much—or as little—as you like.
Interest rates just do not reflect people’s level of concern about the future. Your money might be worth a lot less in 50 years—but the same is not necessarily true of your investments. So—despite all the discussion of interest rates—the topic is an irrelevant digression, apparently introduced through fallacious reasoning.