Non-Fungible Costs
You and your partner live in a cozy one-bedroom in the city. You enjoy being in the city bustle. It’s got a quiet, sunny, plant-filled patio; and is close to all your favourite bars and restaurants.
But you’ve just had a baby. Work is a 40 minute commute. You can afford the current rent, but it feels expensive for the size. And you’re just not visiting those bars and restaurants as often. Maybe you should move to that large apartment outside the city, and closer to both your offices?
So like good rationalists, you reason through the benefits, costs, degrees of certainty etc. and decide to move.
A few months in, your partner says they may be having regrets. You aren’t. You feel great about the decision. But you’re a loving and supportive partner. You both review the decision making process again with an open mind; and your partner arrives at the same decision. Yes, moving made sense.
You end up having to repeat this a few more times, till it all blows up in a big fight. How can they be so irrational?! How can one regret a decision, yet chose it over and over again? Either they have no clue what they want, or just aren’t being honest while evaluating choices.
Or, there is another explanation—that unlike money, the costs and benefits are not fungible. They represent mostly independant sets of desires, which can’t be substituted for one another. Sure your partner values the convenience, space, affordability etc. more than the bustle and social life of the city. But the cost of losing those things didn’t suddenly go to zero once the decision was made.
Outside of pure monetary decision making, most choices pit at least some independant desires against one another. There is a case to be made that the negative reaction to a non-fungible cost, would be the same as if there were no offsetting benefit at all! And that should be considered completely expected and rational.
This applies to everything from life decisions, to public policy, altruism and company values. eg.
Automation / Moving to Renwables will lead to some people losing their jobs, but a net increase in well-paying jobs. But people, their livelihoods, their personal dignity aren’t fungible; or at least they shouldn’t be!
Facebook / Social Media is a net benefit to society. Leadership at these companies strongly believe this, as do I. It removes gatekeepers and democratizes speech. The increased access to information, ideas, and as a tool for organizing and dissent outweighs much of the nastiness, misinfomation and it’s use as a tool by authoritarians. But not all information and ideas are fungible, or at least they shouldn’t be! Two truths and one lie doesn’t make one truth. A thousand likes don’t offset one death threat.
Often critics focusing on the costs will be accused of not having perspective. Of being irrational, unfair, or worse. They talk as if there is no benefit at all! That’s because they’ve identified non-fungible costs*.
BUT, you may retort, if you wouldn’t change the original decision, aren’t the negative reactions, criticism and regret completely useless. What insight or action is one to glean from this?
And I think the answer lies not in changing the old decision, but in making some new ones. Not just ones that continue to increase the original benefit (which most peple already do). But decisions that actively bring in benefits that are directly fungible against these costs. Of course you may not be able to zero out these costs, but that’s not the point. You can make headway in reducing them.
Host and attend more social events, and more trips out to the city etc. for the benefit of your partner. Have a concrete plan for the people who may lose their jobs due to changes in technology. Invest more in the teams that catch the low hanging fruit of spam, death/rape threats and political likes-boosting bot networks.
Make these an integral part of your plan; not because you want to change some perception or get good PR; but because without identifying non-fungible costs in your original decision, you end up leaving a lot of potential benefit on the table. And many of the people criticising your “net-benefit” decision making, will have good rational reasons to do so.
EDIT: Some more formalization in response to variations of “there is some flaw in the original decision making”.
The Non-Fungible Cost approach isn’t changing what you decided. Nor is it claiming these decisions are not possible. It only clarifies WHAT you actually decided. To demonstrate:
CityValue:80
SuburbValue:100
Since SuburbValue > CityValue, choose Suburb.Till here everything is fine. Now, the traditional approach:
NetBenefit=100−80=20
So, there is a 20 point increase in satisfactionCompare this to recognizing that the costs are not fungible with the benefits:
SuburbOutcome={100,−80}
There will be more moments of satisfcation than dissatisfaction.My claim is that the traditional approach is superficially conclusive. It hides the cost. Your satisfaction has increased by 20 points, so grumbling feels irrational. It’s not providing any further signals. The non-fungible approach, simply through framing, drives you to look at that −80. To understand the moments of dissatisfaction. And most importantly—it drives you to action in order to reduce it.
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* I understand that not all types regret and criticism has this insight lying within it. But I think there are enough cases such that it warrants some introspection.
**Implications for Effective Altruism is a large part of what got me thinking about this (Omelas Child etc.), but I purposely kept that out for now. Still piecing together some of my thoughts for how it applies there.
I don’t really follow the logic how the thing hinges on non-fungibility. If the things were not fungible then on review the result should be “apples to oranges—don’t know whether it is worth it”. And outcome “yes, it was the right decision” kind of implies that the downsides were worth the upsides and the axis or “do we or don¨’t” is exactly the axis that the funge against.
I’ve added an EDIT in the post towards the end that I think responds to this
Fungibility is in my mind quite a narrow concept and I can’t really identify the “traditional approach”.
As I am trying to read whatever this “traditional approach” is would reason: product has a consumer satisfaction as low_cost+high_durablity+high_availability+high_familiarity. Some reference good is good in categories low_cost,high_durablity,high_availabilty and bad in high_familiarity but ranks better in satisfaction overall. How can a “better” product have inferiority in it? 20 points better product offcourse means 5+5+5+5 better and any product that has any negative in any category is off course going to be inferior.
But doing a cost benefit analysis often is about discovering the correct way to funge. If you can make the product 1000 times better by increasing the cost by 0.0001 times you probably should do it. That one can stably and reliable balance the costs and benefits strongly suggets that the things are fungeable. If one could rationally insist that not even an iota of size 0.0001 of damage is acceptable to get a benefit of 1000 times in another category that suggests that things would be holy or infinidesimal in regards to each other. But being able to compromise over damage category boundaries means there is no lexical priority between them.
Yes—this is not an argument against making that tradeoff. This is an argument for not treating that tradeoff as a substitue i.e. fungible. Fungibility implies two things are essentially interchangeable and each of whose parts is indistinguishable from another part.
Your weighting or prioritizing didn’t lead to a substitution. You incurred a debt every time you prioritized one category over another. Not all debt is bad, some debt is good—but ignoring debt or incorrectly funging it leads to bad outcomes.
The traditional net-benefit approach leads to exactly this mistake by treating tradeoffs as fungible. Making it ok to incur costs in one category as long as you gain in another category based on some weight and proportion—ad infinitum.
And this actually happens in real life. It’s what leads to things like Technical Debt—where moving quickly is prioritzed over clean code. This can be a good thing for a startup, but treating it as fungible can bring the entire org to a stand-still. The same in City Planning—where housing people quickly, without underlying infrastructure results in permanent slums.
The concept of Non-Fungible Costs is then a useful tool to avoid this tradeoff=substitution spiral.
Ah this really leans into the “indistinguishability” property in the sense of blindness. I was thinking it more as ambivalence, when I go buy orange juice I might not care for the brand that I buy but I can in principle check it.
In the automation example say that there are 1000 jobs about to be born and 1 job about to be lost. Sure just caring about the number of jobs might be blind but if one halts this transition because the loss of the 1 job is unacceptable then that implicitly incurs a heavy weighting between the different jobs (ie the new jobs are about 0.001 worth the old kind of job). Being capriciously impartial could come off as a bias, rather than shooting for general wellbeing you are infact advocating for the well being of some groups over others.
In the technical debt case we could also model it as the step that introduces the standstill to be be a highly harm inducing decision that could not “sneak by” the cost benefit analysis.
I think there is a certain “cost amnesia” that sets in after a “good” decision? Even for fairly large costs. So the “indistinguishability blindness” is often a cognitive response to maintain the image of a good decision rather than determined by hard numbers.
Regardless, this is likely entering speculation territory. It’s something I’d noticed in my own life as well as in policy decisions i.e. a negative reaction to talking about fairly large costs because net-benefits were still positive.
Well, to the extent that you can only live in one universe, and only make a given decision once (“repeated” decisions are actually different decisions with similarities), costs and benefits MUST be converted to a single comparable value.
Even if the costs are multi-dimensional on the inputs, the output (live in city or suburb) is single-dimensional.
> costs and benefits MUST be converted to a single comparable value.
Yes. And now, what should the decision process look like? For monetary decisions, this is easy—money is fungible, so one can use addition/subtraction. But for costs and benefits which are not fungible, can we come up with a decision process, and make sense of our reaction to that decision?
There are two elements to this. The first is purely one of framing—the resulting decision is the same. The second arises from the framing—where the outcome necessitates more decisions. To demonstrate:
CityValue:80
SuburbValue:100
Since SuburbValue>CityValue, choose Suburb.
Till here everything is fine. Now, the traditional approach:
NetBenefit=100−80=20
So, there is a 20 point increase in satisfaction
Compare this to recognizing that the costs are not fungible with the benefits:
SuburbOutcome={100,−80}
There will be more moments of satisfcation than dissatisfaction.
My claim is that the traditional approach is superficially conclusive. Your satisfaction has increased by 20 points, grumbling feels irrational. It’s not providing any further signals. The non-fungible approach, simply through framing, drives you to look at that −80. To understand the moments of dissatisfaction. And most importantly—drives you to action in order to reduce it.
When things like this happen (i.e. net increase but some people pay the cost), it would be nice if we could use some of the extra value to compensate the victims of progress, so that it would be net increase for everyone.
Not sure how to handle the “dignity” part, but maybe find a set of similar jobs and offer free training?
I really appreciated this post and thought it was quite a novel way of viewing situations where one must make a choice where while one option is the clear winner, there is still a lingering feeling of having lost something.
Your final conclusion here appears to be—Do not expect your new pleasures to replace the old.
You will still want these old joys—restaurants, bustle, packed gatherings. Plan for this, as it will not be replaced by the extra space or quietude of the suburbs.
This was very enjoyable read. Thanks for posting.
Yes. And thank you! I’m glad you enjoyed it.
One of my goals was to also apply “Do not expect your new pleasures to replace the old” to other types of decision making. It was a critique of using net-benefit analysis on non-fungible costs. The benefits of a policy don’t replace its harms and costs. Tradeoffs are not the same thing as substitution.
Every tradeoff between non-fungibles incurs a debt, and net-benefit hides that behind a single positive number. It’s an uneccessary step—one can still make tradeoffs, while keeping a ledger of this debt.
This influences real-life outcomes in things like City Planning (where housing people quickly, without underlying infrastructure results in permanent slums) or Politics (where those on the wrong end of the net-gain in jobs are ignored).
These phenomenon wouldn’t come as a big surprise if one had recognized the debt incurred every time we made these tradeoffs.
The first example seems to be an issue of legibility, not fungibility.
Could you elaborate? The point was that desires are not always fungible—they don’t neatly add up or cancel out to give you a single satisfaction score. Your decision making math would still pick the suburb because its convenience value outweighs its lack of restaurants. But you don’t suddenly stop caring about restaurants because of that. Convenience isn’t fungible with it.
I feel like this is more of a yearning for option that is not there: big and cheap apartment that has good social options around and good commute.