Thanks—I think GWWC would be fewer steps for me, but if that’s not looking likely then one of these is plausible.
(I wonder if it would be worth a few of us pooling money to get both “lower fees” and “less need to deal with orgs who don’t just let you click some buttons to say where you want the money to go”, but not sure if that would be legit for gift aid purposes.)
That’s not really “concrete” feedback though, right? In the outcome game/consensus game dynamic Stephen’s talking about, it seems hard to play an outcome game with that kind of feedback.
Beyond being an unfair and uninformed dismissal
Why do you think it’s uninformed? John specifically says that he’s taking “this work is trash” as background and not trying to convince anyone who disagrees. It seems like because he doesn’t try, you assume he doesn’t have an argument?
it risks unnecessarily antagonizing people
I kinda think it was necessary. (In that, the thing ~needed to be written and “you should have written this with a lot less antagonism” is not a reasonable ask.)
For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements.
An implementation detail of LVT would be, how do we decide what counts as one parcel and what counts as two? Depending how we answer that, I could easily imagine LVT causing bad incentives. (Which isn’t a knock-down, it doesn’t feel worse than the kind of practical difficulty any tax has.)
I wonder if it might not be better to just get rid of the idea of “improvements to your own land don’t get taxed”. Then we figure out the value of land in fairly broad strokes (“in this borough, it’s worth £x per square meter”) and just tax based on how much land you own in each price region.
Disadvantage is that improvements to your own land get taxed. I guess most of the time the tax is fairly low, because that tax is distributed over all the land in the price region.
Advantage is less implementation complexity. No need to figure out “how much is this specific land worth without improvements”. (Suppose there’s a popular theme park here. Nearby land probably gets more valuable. When you want to assess the value of the land under the theme park, as if there was no theme park there, how do you do that?)
Asking the question for “land in this general area” seems, still hard, but easier. (Lars Doucet was on the Complex Systems podcast recently, and said one way is to look at sales that were shortly followed by demolition. “This person paid $1m for the land and then an extra $500k to demolish what was there, so the land itself was probably worth $1.5m.”)
I’ve read/listened about LVT many times and I don’t remember “auctions are a key aspect of this” ever coming up. E.g. the four posts by Lars Doucet on ACX only mention the word twice, in one paragraph that doesn’t make that claim:
Land Price or Land Value is how much it costs to buy a piece of land. Full Market Value, however, is specifically the land price under “fair” and open market conditions. What are “unfair” conditions? I mean, your dad could sell you a valuable property for $1 as an obvious gift, but if he put it on the open market, it would go for much more than that. Likewise, it’s not uncommon for a property that’s been foreclosed on and hastily auctioned off to be re-listed publicly by the auction winner for a higher price.
My girlfriend and I probably wouldn’t have got together if not for a conversation at Less Wrong Community Weekend.
Oh, I think that also means that section is slightly wrong. You want to take insurance if
and the insurance company wants to offer it if
So define
as you did above. Appendix B suggests that you’d take insurance if and they’d offer it if . But in fact they’d offer it if .
Appendix B: How insurance companies make money
Here’s a puzzle about this that took me a while.
When you know the terms of the bet (what probability of winning, and what payoff is offered), the Kelly criterion spits out a fraction of your bankroll to wager. That doesn’t support the result “a poor person should want to take one side, while a rich person should want to take the other”.
So what’s going on here?
Not a correct answer: “you don’t get to choose how much to wager. The payoffs on each side are fixed, you either pay in or you don’t.” True but doesn’t solve the problem. It might be that for one party, the stakes offered are higher than the optimal amount and for the other they’re lower. It might be that one party decides they don’t want to take the bet because of that. But the parties won’t decide to take opposite sides of it.
Let’s be concrete. Stick with one bad outcome. Insurance costs $600, and there’s a 1⁄3 chance of paying out $2000. Turning this into a bet is kind of subtle. At first I assumed that meant you’re staking $600 for a 1⁄3 chance of winning… $1400? $2000? But neither of those is right.
Case by case. If you take the insurance, then 2⁄3 of the time nothing happens and you just lose $600. 1⁄3 of the time the insurance kicks in, and you’re still out $600.
If you don’t take the insurance, then 2⁄3 of the time nothing happens and you have $0. 1⁄3 of the time something goes wrong and you’re out $2000.
So the baseline is taking insurance. The bet being offered is that you can not take it. You can put up stakes of $2000 for a 2⁄3 chance of winning $600 (plus your $2000 back).
Now from the insurance company’s perspective. The baseline and the bet are swapped: if they don’t offer you insurance, then nothing happens to their bankroll. The bet is when you do take insurance.
If they offer it and you accept, then 2⁄3 of the time they’re up $600 and 1⁄3 of the time they’re out $1400. So they wager $1400 for a 2⁄3 chance of winning $600 (plus their $1400 back).
So them offering insurance and you accepting it isn’t simply modeled as “two parties taking opposite sides of a bet”.
I still disagree with that.
I’ve written about this here. Bottom line is, if you actually value money linearly (you don’t) you should not bet according to the Kelly criterion.
I think we’re disagreeing about terminology here, not anything substantive, so I mostly feel like shrug. But that feels to me like you’re noticing the framework is deficient, stepping outside it, figuring out what’s going on, making some adjustment, and then stepping back in.
I don’t think you can explain why you made that adjustment from inside the framework. Like, how do you explain “multiple correlated bets are similar to one bigger bet” in a framework where
Bets are offered one at a time and resolved instantly
The bets you get offered don’t depend on previous history
?
This is a synonym for “if money compounds and you want more of it at lower risk”.
No it’s not. In the real world, money compounds and I want more of it at lower risk. Also, in the real world, “utility = log($)” is false: I do not have a utility function, and if I did it would not be purely a function of money.
Like I don’t expect to miss stuff i really wanted to see on LW, reading the titles of most posts isn’t hard
It’s hard for me! I had to give up on trying.
The problem is that if I read the titles of most posts, I end up wanting to read the contents of a significant minority of posts, too many for me to actually read.
Ah, my “what do you mean” may have been unclear. I think you took it as, like, “what is the thing that Kelly instructs?” But what I meant is “why do you mean when you say that Kelly instructs this?” Like, what is this “Kelly” and why do we care what it says?
That said, I do agree this is a broadly reasonable thing to be doing. I just wouldn’t use the word “Kelly”, I’d talk about “maximizing expected log money”.
But it’s not what you’re doing in the post. In the post, you say “this is how to mathematically determine if you should buy insurance”. But the formula you give assumes bets come one at a time, even though that doesn’t describe insurance.
The probability should be given as 0.03 -- that might reduce your confusion!
Aha! Yes, that explains a lot.
I’m now curious if there’s any meaning to the result I got. Like, “how much should I pay to insure against an event that happens with 300% probability” is a wrong question. But if we take the Kelly formula and plug in 300% for the probability we get some answer, and I’m wondering if that answer has any meaning.
I disagree. Kelly instructs us to choose the course of action that maximises log-wealth in period t+1 assuming a particular joint distribution of outcomes. This course of action can by all means be a complicated portfolio of simultaneous bets.
But when simultaneous bets are possible, the way to maximize expected log wealth won’t generally be “bet the same amounts you would have done if the bets had come one at a time” (that’s not even well specified as written), so you won’t be using the Kelly formula.
(You can argue that this is still, somehow, Kelly. But then I’d ask “what do you mean when you say this is what Kelly instructs? Is this different from simply maximizing expected log wealth? If not, why are we talking about Kelly at all instead of talking about expected log wealth?”)
It’s not just that “the insurance calculator does not offer you the interface” to handle simultaneous bets. You claim that there’s a specific mathematical relationship we can use to determine if insurance is worth it; and then you write down a mathematical formula and say that insurance is worth it if the result is positive. But this is the wrong formula to use when bets are offered simultaneously, which in the case of insurance they are.
This is where reinsurance and other non-traditional instruments of risk trading enter the picture.
I don’t think so? Like, in real world insurance they’re obviously important. (As I understand it, another important factor in some jurisdictions is “governments subsidize flood insurance.”) But the point I was making, that I stand behind, is
Correlated risk is important in insurance, both in theory and practice
If you talk about insurance in a Kelly framework you won’t be able to handle correlated risk.
If one donates one’s winnings then one’s bets no longer compound and the expected profit is a better guide then expected log wealth—we agree.
(This isn’t a point I was trying to make and I tentatively disagree with it, but probably not worth going into.)
Whether or not to get insurance should have nothing to do with what makes one sleep – again, it is a mathematical decision with a correct answer.
I’m not sure how far in your cheek your tongue was, but I claim this is obviously wrong and I can elaborate if you weren’t kidding.
I’m confused by the calculator. I enter wealth 10,000; premium 5,000; probability 3; cost 2,500; and deductible 0. I think that means: I should pay $5000 to get insurance. 97% of the time, it doesn’t pay out and I’m down $5000. 3% of the time, a bad thing happens, and instead of paying $2500 I instead pay $0, but I’m still down $2500. That’s clearly not right. (I should never put more than 3% of my net worth on a bet that pays out 3% of the time, according to Kelly.) Not sure if the calculator is wrong or I misunderstand these numbers.
Kelly is derived under a framework that assumes bets are offered one at a time. With insurance, some of my wealth is tied up for a period of time. That changes which bets I should accept. For small fractions of my net worth and small numbers of bets that’s probably not a big deal, but I think it’s at least worth acknowledging. (This is the only attempt I’m aware of to add simultaneous bets to the Kelly framework, and I haven’t read it closely enough to understand it. But there might be others.)
There’s a related practical problem that a significant fraction of my wealth is in pensions that I’m not allowed to access for 30+ years. That’s going to affect what bets I can take, and what bets I ought to take.
The reason all this works is that the insurance company has way more money than we do. …
I hadn’t thought of it this way before, but it feels like a useful framing.
But I do note that, there are theoretical reasons to expect flood insurance to be harder to get than fire insurance. If you get caught in a flood your whole neighborhood probably does too, but if your house catches fire it’s likely just you and maybe a handful of others. I think you need to go outside the Kelly framework to explain this.
I have a hobby horse that I think people misunderstand the justifications for Kelly, and my sense is that you do too (though I haven’t read your more detailed article about it), but it’s not really relevant to this article.
I think the thesis is not “honesty reduces predictability” but “certain formalities, which preclude honesty, increase predictability”.
I kinda like this post, and I think it’s pointing at something worth keeping in mind. But I don’t think the thesis is very clear or very well argued, and I currently have it at −1 in the 2023 review.
Some concrete things.
There are lots of forms of social grace, and it’s not clear which ones are included. Surely “getting on the train without waiting for others to disembark first” isn’t an epistemic virtue. I’d normally think of “distinguishing between map and territory” as an epistemic virtue but not particularly a social grace, but the last two paragraphs make me think that’s intended to be covered. Is “when I grew up, weaboo wasn’t particularly offensive, and I know it’s now considered a slur, but eh, I don’t feel like trying to change my vocabulary” an epistemic virtue?
Perhaps the claim is only meant to be that lack of “concealing or obfuscating information that someone would prefer not to be revealed” is an epistemic virtue? Then the map/territory stuff seems out of place, but the core claim seems much more defensible.
“Idealized honest Bayesian reasoners would not have social graces—and therefore, humans trying to imitate idealized honest Bayesian reasoners will tend to bump up against (or smash right through) the bare minimum of social grace.” Let’s limit this to the social graces that are epistemically harmful. Still, I don’t see how this follows.
Idealized honest Bayesian reasoners wouldn’t need to stop and pause to think, but a human trying to imitate one will need to do that. A human getting closer in some respects to an idealized honest Bayesian reasoner might need to spend more time thinking.
And, where does “bare minimum” come from? Why will these humans do approximately-none-at-all of the thing, rather than merely less-than-maximum of it?
I do think there’s something awkward about humans-imitating-X, in pursuit of goal Y that X is very good at, doing something that X doesn’t do because it would be harmful to Y. But it’s much weaker than claimed.
There’s a claim that “distinguishing between the map and the territory” is distracting, but as I note here it’s not backed up.
I note that near the end we have: “If the post looks lousy, say it looks lousy. If it looks good, say it looks good.” But of course “looks” is in the map. The Feynman in the anecdote seems to have been following a different algorithm: “if the post looks [in Feynman’s map, which it’s unclear if he realizes is different from the territory] lousy, say it’s lousy. If it looks [...] good, say it’s good.”
Vaniver and Raemon point out something along the lines of “social grace helps institutions perservere”. Zack says he’s focusing on individual practice rather than institution-building. But both his anecdotes involve conversations. It seems that Feynman’s lack of social grace was good for Bohr’s epistemics… but that’s no help for Feynman’s individual practice. Bohr appreciating Feynman’s lack of social grace seems to have been good for Feynman’s ability-to-get-close-to-Bohr, which itself seems good for Feynman’s epistemics, but that’s quite different.
Oh, elsewhere Zack says “The thesis of the post is that people who are trying to maximize the accuracy of shared maps are going to end up being socially ungraceful sometimes”, which doesn’t sound like it’s focusing on individual practice?
Hypothesis: when Zack wrote this post, it wasn’t very clear to himself what he was trying to focus on.
Man, this review kinda feels like… I can imagine myself looking back at it two years later and being like “oh geez that wasn’t a serious attempt to actually engage with the post, it was just point scoring”. I don’t think that’s what’s happening, and that’s just pattern matching on the structure or something? But I also think that if it was, it wouldn’t necessarily feel like it to me now?
It also feels like I could improve it if I spent a few more hours on it and re-read the comments in more detail, and I do expect that’s true.
In any case, I’m pretty sure both [the LW review process] and [Zack specifically] prefer me to publish it.
Based on https://www.gov.uk/government/publications/charities-detailed-guidance-notes/chapter-3-gift-aid#chapter-344-digital-giving-and-social-giving-accounts, doing this the naive way (one person collects money and gives it to the charity, everyone shares the tax rebate) is explicitly forbidden. Which makes sense, or everyone with a high income friend would have access to the 40% savings.
Not clear to me whether it would be allowed if the charity is in on it and everyone fills in their own gift aid declaration. But that’s extra steps for all parties.