I don’t see the connection to sunk cost or diminishing returns. You can commit the infinity fallacy even if the predicted returns or costs are completely correct. Consider the frugal old loner who dies a millionaire, or the slay the spire examples from the initial post. There is a category of error where even if you predict the long-term trend, it doesn’t matter because you won’t care by the time it happens.
I guess this means that ‘discount rates’ are not as good of a match as I thought?
Prior to this discussion i did not know what discount rate was. So i went and learned about it. Correct me if i am wrong. It is something like this:
Let’s say that i want to have 20.000 dollars exactly 1 year from now. I will invest into some fund that has an interest rate of 5%. How much money should i invest today to have 20.000 dollars exactly 1 year later?
I have to put 19,047619 dollars today to have 20.000 dollars exactly 1 year later.
If i understood it correctly your question to people who does the infinity fallacy is “You assume that you can put any number in the place of 𝑛 even infinity itself. That is illogical.”
Yes i agree. I still think that the law of diminishing returns is fitting for this problem isn’t it?
If you solely take the factors as money and numbers yeah sure maybe in some situations there might not be a diminshing return. Let us just assume that there is not diminishing return as far as money and resources goes. Then i would say that you are excluding the human from the equation. Human is the one who goes thru all of these to achieve a certain thing. If it is not use for the human even if everything else works out correctly. It still does not matter just like you said.
If you want to keep it mathematical think it like this:
Human happiness = H
Effort = E
Money = M
1H 1E 1M
10H 5E 20M
5H 40E 15M
I did not went thru a calculation to get these numbers but they are just there to explain a point. As you can see at first our human gets happy to achieve 10 happiness thru 20 money with only spending 5 effort.
But then he puts more effort. He puts 40 effort and he successfully gets 15 Money. However this time gaining more money simply made him less happy because the effort is too much now.
Isn’t this a diminishing return? You would argue that yes there is a diminishing return in the human happiness but because there IS a diminishing return in the system anyway. What happens when the system does not hit the diminishing return point ever?
I would argue that this changes nothing. Let us just assume that our human somehow gains infinite money with very low effort. The system itself never hits diminishing returns. However our human probably wanted to gain that money for something. The moment that money is way more than enough and that even the effort is so low that the system never hits diminishing returns, it will still hit diminishing returns once the effort hits high enough that it disturbs the targeted confort that the money is being used to acquire. We can even go further than that and can simply say that it should be enough to say that is a diminishing return point the moment the human itself finds it “boring” or “not to matter”.
So for that reason as a “meme” to explain that someone is doing infinity fallacy. Diminishing returns does apply to this situation and it is a well known phrase that can be used in a conversation.
I don’t see the connection to sunk cost or diminishing returns. You can commit the infinity fallacy even if the predicted returns or costs are completely correct. Consider the frugal old loner who dies a millionaire, or the slay the spire examples from the initial post. There is a category of error where even if you predict the long-term trend, it doesn’t matter because you won’t care by the time it happens.
I guess this means that ‘discount rates’ are not as good of a match as I thought?
Prior to this discussion i did not know what discount rate was. So i went and learned about it. Correct me if i am wrong. It is something like this:
Let’s say that i want to have 20.000 dollars exactly 1 year from now. I will invest into some fund that has an interest rate of 5%. How much money should i invest today to have 20.000 dollars exactly 1 year later?
The formula is this(source:https://openstax.org/books/principles-finance/pages/7-4-applications-of-tvm-in-finance?query=discount%20rate&target=%7B%22index%22%3A0%2C%22type%22%3A%22search%22%7D#para-00003):
PV = FV × 1/1(1+𝑟)^𝑛
PV = 20.000* 1/1(1+5%)^1
PV = 20.0000 * 1/1(1.05)^1
PV = 20.000 * 0,95238095
PV = 19,047619
I have to put 19,047619 dollars today to have 20.000 dollars exactly 1 year later.
If i understood it correctly your question to people who does the infinity fallacy is “You assume that you can put any number in the place of 𝑛 even infinity itself. That is illogical.”
Yes i agree. I still think that the law of diminishing returns is fitting for this problem isn’t it?
If you solely take the factors as money and numbers yeah sure maybe in some situations there might not be a diminshing return. Let us just assume that there is not diminishing return as far as money and resources goes. Then i would say that you are excluding the human from the equation. Human is the one who goes thru all of these to achieve a certain thing. If it is not use for the human even if everything else works out correctly. It still does not matter just like you said.
If you want to keep it mathematical think it like this:
Human happiness = H
Effort = E
Money = M
1H 1E 1M
10H 5E 20M
5H 40E 15M
I did not went thru a calculation to get these numbers but they are just there to explain a point. As you can see at first our human gets happy to achieve 10 happiness thru 20 money with only spending 5 effort.
But then he puts more effort. He puts 40 effort and he successfully gets 15 Money. However this time gaining more money simply made him less happy because the effort is too much now.
Isn’t this a diminishing return? You would argue that yes there is a diminishing return in the human happiness but because there IS a diminishing return in the system anyway. What happens when the system does not hit the diminishing return point ever?
I would argue that this changes nothing. Let us just assume that our human somehow gains infinite money with very low effort. The system itself never hits diminishing returns. However our human probably wanted to gain that money for something. The moment that money is way more than enough and that even the effort is so low that the system never hits diminishing returns, it will still hit diminishing returns once the effort hits high enough that it disturbs the targeted confort that the money is being used to acquire. We can even go further than that and can simply say that it should be enough to say that is a diminishing return point the moment the human itself finds it “boring” or “not to matter”.
So for that reason as a “meme” to explain that someone is doing infinity fallacy. Diminishing returns does apply to this situation and it is a well known phrase that can be used in a conversation.
Is it still not useful for this situation?