Maybe uncertainty makes you nervous, [...]. Then either I’m weakly money pumping you [...], or I’m objectively granting you the removal of your worry as a service. Most people at the time feel that I’m granting them a service, but afterwards they feel I money pumped them. Especially if I repeat it.
Does this mean we should start treating certain types of money pumping as payment for a service rather than something rational agents always avoid?
The name of the service is “insurance”. This is a business in which customers repeatedly make bets that they wish they hadn’t made in retrospect, but it still makes sense to make the bet ex ante.
Agreed.
I work on prediction markets, so I see it all as bets, and am used to thinking that both participants in a purely financial trade can gain from it, even though many people on the outside of the deal see it as zero sum. Sometimes you increase your variance because you think it’s worth increasing your expected return, other times you reduce your variation.