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Is there something like marginal rate of substitution but dimensionless

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genepool posted on Tue, Apr 10 2012 4:19 AM

Say I am indeference between 1 apple and 2 orange. My marginal rate of substitution of apple with respect to orange is 1 apple/2 orange.

Notice, it has a unit. Namely apple/orange.

What if I express that in percentage. I would sacrifice 10% of apple for an extra 5 % orange possesion. Do we have something like that?

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Relevant for Indifference curves:

http://mises.org/daily/2003

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In game theory, quite often you act randomly. When you act randomly, you are facing 2 choices that you are indeferent to each other,

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Well in Austrian economics you don't act randomly.
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jdkdsgn replied on Wed, Apr 11 2012 10:49 AM

In real life (I hope) you don't act randomly... Check out Mises' definition of Human Action (praxeology) and the logic which he uses. People always act in purposeful ways, even when they decided not to choose, for that in itself is a choice. 

also, what is the point of the question? What is the goal to which you would apply 1 apple or 2 oranges as a means? What do those percentages tell us?

If you were hungry, and you felt like 2 apples would do, or 1 orange, all that's left is your subjective decision to choose one or the other, depending on the moment. Maybe in the moment, your tongue tells you it wants a citrus flavor instead of a tart flavor, and then the orange takes the lead. Perhaps it's vice versa. Maybe the voices in your head persuade you to eat the apples. 

Help me out if I'm not following your argument.

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genepool replied on Wed, Apr 11 2012 10:53 AM

Really? Let's play rock scissors and papers then.

Or what about casino. They play random. A casino can choose to always pop up black or always pop up red, but if people know it, they will always pick black and red.

What about tennis? When do you attack left and right?

Or what about fighting. Do you fight back every single guys that fight you? Unefficient. You forgive most, you set some as samples. Which one? Random.

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jdkdsgn replied on Wed, Apr 11 2012 11:03 AM

You make a choice because you believe it is the best possible means to attain your goal (to remove uneasiness). Choices are not random, no matter how shallow a thought process is.

 

Edit:
Furthermore, let's take a praxeological approach to the game rocks, paper scissors. It's the first round, and I know based on games I've played before, that most people tend to choose scissors on the first bout of the game. With this in mind, I have a good incentive to play rock instead of scissors (a draw) or paper (a loss) if I want to win.
 
Other things I take into account: most people feel uncomfortable playing the same thing over and over again (i.e. playing rock every round, or a combination of rock, scissors, paper sequentially) for fear that they will become predictable and will lose once the other player figures out his/her scheme. 
 
The thought, "I'm going to play scissors" has a justification - somehow, the player BELIEVES that his/her playing of scissors will win that round. Choices cannot be random because humans are not random in their decision making process.
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Or what about fighting. Do you fight back every single guys that fight you? Unefficient. You forgive most, you set some as samples. Which one? Random.

Haha. Alright then.

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That last sample is actually what least obvious to me. Yet most neurotypical people take that naturally.

I learn something new :)

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Furthermore, let's take a praxeological approach to the game rocks, paper scissors. It's the first round, and I know based on games I've played before, that most people tend to choose scissors on the first bout of the game. With this in mind, I have a good incentive to play rock instead of scissors (a draw) or paper (a loss) if I want to win.
 
Other things I take into account: most people feel uncomfortable playing the same thing over and over again (i.e. playing rock every round, or a combination of rock, scissors, paper sequentially) for fear that they will become predictable and will lose once the other player figures out his/her scheme. 
 
The thought, "I'm going to play scissors" has a justification - somehow, the player BELIEVES that his/her playing of scissors will win that round. Choices cannot be random because humans are not random in their decision making process.

Quote

 

If I want to improve my elo rating in rocks papers and scissors and I play against you, I will definitely play random. In fact, I would bring a random generator and do whatever it says.

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genepool:

If I want to improve my elo rating in rocks papers and scissors and I play against you, I will definitely play random. In fact, I would bring a random generator and do whatever it says.

/thread

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Haha. Great response, gotlucky!

1) Gotlucky definitely answered that fantastically

2) Actually, there are strategies to have winning records against supposedly random games. For example, Hagelbarger's mind-reading machine beat the "randomness" of humans in games. The game is one where the human chooses heads or tails and the machine must guess what the human will choose. This machine created in the 50s got a winning track record that could have happened by chance only 1 out of 10 billion times.

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I think the thread has been derailed, but back to the original question. Yes, sacrificing 10% apples for an extra 5% of oranges is completely possible within indifference curves. Apparently you value 1% of your current oranges to 2% of your current apples. 

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genepool replied on Wed, May 16 2012 12:50 AM

Yes. What do they call it indeference elasticity?

So their dimensionless marginal rate of substitution between apples and orange is 2 then.

The normal marginal rate of substitution is 2 apples/1 orange (which has dimension, namely apple and orange)

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