Hi Ruchira --
There's no real mapping between a single good being FREE, and having 0
WEALTH.? If you have a logarithmic utility function for wealth, and
someone has $100,010, then it's going to be a nearly-linear section
when they consider possibilities of starting with $100,010 and ending
with a toy and $100,000, $100,009, or $100,010.?? "Predictably
Irrational" argues that if you have a nice smooth logarithmic utility
of wealth function and then stick the possibility of a free good in
front of us, our utility functions start to turn into funny and
irrational shapes, not near zero wealth but near our present wealth (in
this example, there is a discontinuity in the curve not at wealth = $0
but at wealth = $100,010, and steeper slopes in that general area...
Predictably Irrational claims that we'd care more about a toy costing
$9 vs $10 rather than a car costing $30,000 vs $30,001, even though the
logarithmic/concave utility function says it should be the other way
On Mon, Nov 9, 2009 at 12:23 AM, Ruchira <[address removed]>
I got started reading _Predictably Irrational_, it looks
really interesting. ?
I've read through to the end of the appendix to Chapter 3, and
I'm puzzled. ?Assuming a logarithmic utility of wealth is not at all
unconventional in economics (more generally, utility functions are
assumed to be concave). ?As far as I understand, it does not fall
within the purview of what an orthodox economist (as opposed to a
behavioral one like Ariely) would call irrational. ?But with
logarithmic utility of wealth, FREE does have a special place, as the
log of zero is negative infinity.
Here are some other books that I had mentioned today or last
_The Symbolic Species_ by Deacon--good to read after _Mothers
and Others_ (or before, as I did). ?About the uniqueness of symbolic
language to humans and its coevolution with infant brains. ?Deacon is a
biological anthropologist at Berkeley.
_Rationality for Mortals_ by Gigerenzer--might be good to read
after _Predictably Irrational (I haven't read this one). ?About how
what seems irrational may not be, when looking at the bigger picture of
humans in their evolutionary context. ?Gigerenzer is a psychologist.
_Phantoms in the Brain_ by Ramachandran and Blakeslee--about
people's integration of their bodies (and extensions thereof) with
their brains. ?I've read this one, as I think some others have as well.
? It's quite good, and has been suggested for this reading group
several times. ?Ramachandran is a neuroscientist.
Ant?nio Dam?sio: I read and was stimulated by his first book,
_Descartes' Error: Emotion, Reason, and the Human Brain_--relating to
the question of motivation that Scott and Dana are interested in.
?However, this may not be the best book of his to read. ?A speaker at a
technical talk I went to a few years ago said the somatic marker
hypothesis had been falsified, although when I looked it up later it
seemed that what had been falsified was an interpretation that was not
what I had thought Dam?sio meant, when I read his book. ?Anyway,
Dam?sio's later books might reflect the subsequent development of his
thinking. ?Dam?sio is a neuroscientist.
_The Body Has A Mind Of Its Own_ by Blakeslee--similar to
_Phantoms in the Brain_, but is less of a scientific memoir and more of
a popular exposition (and also includes newer material, having come out
nine years later). I'm currently reading this. ?Blakeslee is a science
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