October 19, 2007
Arnold Kling
Daniel Kahneman, the psychologist who won an economics Nobel, talked at Edge.org. Transcript.
it turns out that experience utility can be defined in at least two very different ways. One way is when a dentist asks you, does it hurt? That's one question that's got to do with your experience of right now. But what about when the dentist asks you, Did it hurt? and he's asking about a past session. Or it can be Did you have a good vacation? You have experience utility, which is everything that happens moment by moment by moment, and you have remembered utility, which is how you score the experience once it's over.
And some fifteen years ago or so, I started studying whether people remembered correctly what had happened to them. It turned out that they don't. And I also began to study whether people can predict how well they will enjoy what will happen to them in future. I used to call that "predictive utility", but Dan Gilbert has given it a much better name; he calls it "affective forecasting". This predicts what your emotional reactions will be. It turns out people don't do that very well, either.
I want to be snide and say, "and we try to elicit reports of how happy someone is in the present. And it turns out that people don't do that very well, either."
Whether you are a believer or a skeptic in what he does, I recommend the talk.
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CATEGORIES: Behavioral Economics and Rationality (268)
Actually, Dan Gilbert's argument was that people are extremely good at reporting their emotional present. In fact, he argued that people couldn't remember or forecast their emotional states because they couldn't suspend their current emotional state the same way that they could suspend their current sensory inputs. They can vividly remember or even forecast a visual or tactile experience because their brain allows them to suspend their current visual and tactile inputs. The brain stubbornly refuses to allow you to suspend your current emotional sensations.
In fact, Gilbert's prescription for predicting your future experiences is to find someone to whom those experiences are currently happening. He argues that the differences between people and their preferences are generally much smaller than the errors introduced by trying to predict your future emotional outcomes.
We deal in a combinatorial world on one hand and a linear world on the other.
Our ability to remember events is more closely related to our ability to track some number of herd events, locally, over space and time. We remember a finite set, throwing away the least informative event, in our combinatorial world. The least informative event is either the farthest in time or weakest in strength.
The number N events we track result in the number N in which we assume binomial holds. It relates to the universal error ratio, or herding constant.
It defines the "rank" at which a herd member has to move between quantum states over time in order to approximate the binomial system in a combinatorial world.
When you move a herd of cattle to the rocky mountains and wait a few hundred years they look like mountain goats. The reason is the Solow growth residual, cows seek better ways to move from grassy knoll to grassy knoll so they can better approximate a gaussian distribution. They become more efficient at switching between quantum states under quantum restrictions.
