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Defence in anarchy

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Malachi replied on Sun, Apr 28 2013 4:11 PM

People can start up a fund with their own capital and trade stocks and bonds for your own profit. They run a business with no clients.

the people who buy the things that they sell are customers.

A business operation is just an organization dedicated to pursue profits.

right, but profits only occur as a result of voluntary interaction. when someone steals something it is just an involuntary balance transfer, nothing is produced. we distinguish between organizations that engage in catallacty and organizations that employ coercion. this distinction is non-trivial, it is central to the discussion. your attempts to wallpaper over it are not going to make things clearer.

So if those thieves have invested capital, and they have a plan on how to make their investment generate returns, and they follow on, they have a business.

stealing things isnt generating returns, those are takes. as in, on the take, or got taken. returns are voluntary. 

In business it is measured in the bottom line.

that means you have to keep books which means youre talking about catallacty. so I'm right again.

Yeah, that's where I was hoping to get. I'm glad you've said it.

"External costs" do not enter into profit calculation.

I agree with you, they are real, but no one gives a fuck, so long as they are external.

moving things around unilaterally isnt profit, even if the place where it used to be is external to your books. its external to your calculation process so it looks like a gain but its not productive, so its not sustainable, so its not profitable. these are two different categories of action and your attempts to conflate them are sophomoric and reveal your lack of depth of thought on these matters.

There are many ways your business activity can create "external costs" to other people. These costs are a total non-issue regarding your decision to go into business.

I cant tell if thats a tautology or an article of faith. the point is that costs that are external to your books arent external to the universe. bad neighbors dont get treated better, they get treated worse.

I can easily return your previous question to you: "does your definition of profit explain why someone would start up criminal activities?".

it sure does.

why a few people chose a life of crime?

they are subsidized through the state through the criminal justice industry.

Maybe but that's entirely irrelevant.

it is relevant to your ill mannered attempts to impose strange definitions upon us.

 
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So "profits" are economic gains from strictly "voluntary transactions", right? And by "voluntary transactions" we mean transactions between agreeing parts that do not cause external costs to third parties.

Isn't that your point?

Now here's the thing: most of the time you cannot compute the costs you are creating for third parties. Every little thing you do probably impacts every other person in the universe somehow, and you cannot even begin to estimate whether this impact will be positive, neutral or negative, given their subjective perceptions.

And that's okay, because most of the time you don't care. Their evaluations do not impact your bottom line. 

You only start to care when these third parties start mobilizing retaliatory measures, measures that will internalize part of the costs that were once external to your books.

I agree with you, if you're very aggressive and you create lots of costs to third parties you can expect to become a target for retaliation soon. But that doesn't mean there aren't profits to collect from the external damage you create, at least for a while.

Say for instance that the business consists of a professional hit man, that gets paid to whack people.

The contract between buyer and seller of this kind of service is voluntary. If the hit man expects a material cost of a thousand bucks to kill and get rid of some low profile target, and the guy paying for the service feels like it's worth five grand to eliminate that target, the hit man expects to pocket $4k for the job. Then he considers if it's worth it, given his time, reputation, risk considerations, as well as his need for a quick buck.

If everything seems to add up the job gets done. And fuck if that jerk-off who's getting clipped thinks his life worths more than four gees. His cost is external to business being conducted.

Of course, once too many jerk-offs start fearing they'll get clipped one day or another, they will change some of their habits and make the life of the hit man more complicated.

But until then, the hit man can expect to make a good payday.

There's no bookkeeping for the whole "economy".

Operations that profit from external costs are everywhere, and it's fair to assume that every profit seeking operation causes some sort of external cost to someone.

Even the fairest free-market enterprise, that doesn't deal with any criminal shenanigans.

If it makes profits, it's causing opportunities costs to a lot of third parties who could be profiting from the business it is making. And they too will retaliate, buy market competition, reducing its profit margins.

There are no "reliable profitable business", just operations that take advantage of local and temporary opportunities of gains.

These operations can be legitimate or criminal, in respect to their relationship with the present justice system set up by the state.

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Malachi replied on Mon, Apr 29 2013 4:23 PM

Now here's the thing: most of the time you cannot compute the costs you are creating for third parties.

thats because most of the time you arent creating costs for them. but in the interactions you describe and want to call "profitable," you are, because there wouldnt be any profits without a cost to a third party. the cost to the third party is the source of the material gains youre referring to. 

your entire argument consists of nothing more than a willful denial of the distinction between cattallacty and coercive exchange. the two phenomena are different, they have different effects, your decision to conflate them doesnt erase the actual differences, it just makes you literally dumber, just as if you had decided that, since they both come from trees, apples and pinecones are the same thing.

Every little thing you do probably impacts every other person in the universe somehow, and you cannot even begin to estimate whether this impact will be positive, neutral or negative, given their subjective perceptions.

do you honestly believe that you cant determine whether depriving (let's call him) Brian of his property would be a subjective negative to Brian?

it's fair to assume

no its not, shut up. your argument is just a potpourri of noncognitivism and petitio principii. 

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I'm using examples of obvious violent interactions taken from organized crime depictions in the news and pop culture. 

I'm doing it because I'm trying to make it simple and familiar, so you can understand how violence can effectively be used as an economic factor mobilized to generate profits to some (and losses to others).

Instead of gangsters, I could be just as well talking about the state, and politicians and so on. It would be exactly the same, but people are not used to think of the political entities as economic actors and the political game as an economic interaction among business models, so I opted for organized crime as my model. At least people are used to see gangsters as businessman concerned with the bottom line.

But you're still reluctant to accept the validity of my point. It's ok, it took a while for me to understand it, so I won't blame you. Perhaps my presentation isn't as clear as I thought.

Well, let me try again.

You point out to the "distinction between cattallacty and coercive exchange". Well, if I correctly recall von Mises' jargon, you're basically talking about the separation between violent versus non-violent transactions.

That's indeed my point. Not that I entirely conflate "violent" and "peaceful" exchange, as if both were the same class of economic interactions. Obviously they are not.

My point is much more subtle than that though. My point is that both are forms of economic interaction. And the choice among them is an economic choice. A decision maker may try to strike a peaceful deal or try to enforce some sort of coercive action to solve some problem, and that decision will depend on how much he expects to gain from this or that.

And sometimes he might realize he has more to gain by being the aggressor. And that's why violence is rationally put to use so frequently in so many occasions in real life.

Organized crime and the political system are just two forms of rational management of violent tactics and coercive power commodities.

As for your understanding the ramifications of third party external costs, you're being very naive and simplistic.

If you steal a man's car you may have an idea of who's being affected and how much, but things become much less clear when you pollute the air with your factory.

And that's just a plain obvious example. Some operations create third party hazards that are not entirely understood before hand, and you can only start contemplating the cost its causing to others once you start being retaliated by them. You will start considering whether to stop or make substantial changes in your operation when these retaliation costs start eating up your profit margins.

That's how every business operation on Earth is managed. From your neighborhood small time mobster to the mega-corporations.

There's a distinction between peaceful and violent exchange, as you've pointed out, and I have agreed. But it's much less clear in real life than in your abstractions, and they are not always understood beforehand.

So if your point is constructed over this sharp distinction, so to conclude that this distinction is sharp, it's you that is committing the "petitio principii", not me.

In any case, you should make an effort being a little bit less hostile. As I've said, I'm not your enemy. Not that it bothers me much being called "dumb" repeatedly by an internet forum user, but you otherwise strike me as a smart kid and I'm sure you can do better than reduce yourself to the typical internet forum lower common denominator.

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Malachi replied on Tue, Apr 30 2013 4:48 PM

I'm doing it because I'm trying to make it simple and familiar, so you can understand how violence can effectively be used as an economic factor mobilized to generate profits to some (and losses to others).

I already explained to you that those arent profits.

But you're still reluctant to accept the validity of my point.

your last point was false. now that you have backpedaled to something we agree on, you have nothing interesting to say, because your analysis is still superficial.

My point is much more subtle than that though. My point is that both are forms of economic interaction.

so your point is that "economic interaction is economic interaction." good job.

And sometimes he might realize he has more to gain by being the aggressor. And that's why violence is rationally put to use so frequently in so many occasions in real life.

do you have any insight into that thought process or would you like it explained to you?

If you steal a man's car you may have an idea of who's being affected and how much, but things become much less clear when you pollute the air with your factory.

so you think this makes grand theft auto the same as emitting carbon byproducts into unowned space?

That's how every business operation on Earth is managed

every business on earth consider car theft to be the same as carbon emissions?

There's a distinction between peaceful and violent exchange, as you've pointed out, and I have agreed. But it's much less clear in real life than in your abstractions, and they are not always understood beforehand.

oh shut up, it is not less clear. I bet if somebody came over to your house and "made a profit" from stealing your furniture you wouldnt come on here and tell us how unclear everything was.

In any case, you should make an effort being a little bit less hostile. As I've said, I'm not your enemy. Not that it bothers me much being called "dumb" repeatedly by an internet forum user, but you otherwise strike me as a smart kid and I'm sure you can do better than reduce yourself to the typical internet forum lower common denominator.

you should put more effort into understanding this topic, particularly my posts to you. I'm doing you a favor by alerting you when you say something especially stupid, as I had assumed that you didnt want to be dumb and would appreciate finding out when you had been dumb.

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I'm perfectly aware that you want to reserve the word profit to the economic outcomes of peaceful/voluntary interactions.

And I'm telling you that profit is the difference between revenue generated and cost incurred by an operation, to those running the operation, and not to all the third parties who might have windfall gains or bear external costs due to such operation.

But I don't want to discuss semantics even though I know most dictionaries would corroborate my definition. You don't need to acquiesce to my definition, you can simply assume that every time I use the world "profit" or any of its derivatives I'm using the second sense.

By the way, (I guess) that's what you do already when you read it written in non-radical libertarian texts (I hope you still read some of them), so I believe it won't be so hard for you to grant me the same liberty.

So we can either keep fighting over who has the right to define the words we are using, or we can move on once we establish a satisfying degree of mutual understanding. I opt to move on.

You've said I've "backpedaled" my point. I didn't. I'm trying to re-elaborate it over and over, given that you've been signaling me that you were not following. But it's useless to argue over that. 

I can simply re-state my original points now and you can single out where are your points of contention:

Power to generate violence is an economic resource, and violent interactions are economic interactions that follow economic patterns. People will resort to violence whenever they judge it to be the less costly way to get what they want. And since sometimes it is indeed less costly to get things by coercion, violence is put to use. 

And I've been showing plenty of examples of that. From the organized crime world to institutional slavery to the partisan politics of the american democracy, there are many ways people can profit from coercive operations.

At any point I've defended that a particular form of violence is a "reliable" or "long term sustainable" way of getting things done. But then again, no business practical is "reliable" in the long run.

In any case that's entirely besides the point. The decision maker who's contemplating the use of violence is generally not thinking about the very long run of human institutions. He's thinking about how he can get some very precise thing done, and how much is it going to cost him to do it.

Being moderate in one's use of violence can have positive medium term impacts in one's bottom line if that is expected to augment one's reputation among prospective economic partners, but those long term dynamics are very complicated.

You can not come with a one-size-fits-all proposition that violence is never effective, mainly because this is not what we see in practice. I've been giving you plenty of examples, so open your eyes a little bit.

On externalities, of course the external costs of carjacking and pollution generating factories aren't similar, and this distinction is what I was trying to point out.

One creates costs to the vehicle owners who had their cars stolen, and some secondary costs to those who got their cars recovered, or who payed for insurance and never got robbed, or who changed their habits to avoid being robbed.

But these external costs are reasonably concentrated to a group, and the impact of each carjack is very high (for at least the one guy who's getting robbed).

The costs of air pollution, on the other hand, are very disperse among many people. And the impact of each business on overall pollution is also very small.

And those are two classes of economic interactions for which we do have a somewhat clear idea of third party impact. For most we don't, it's all very non-linear and complicated.

That's just to say that we can't include external costs into profit calculation, because most operations have consequences to third parties that are not completely known.

Your holistic notion of "economic profit", in a sense of a positive gain for the whole society, is not only not used in practice, it is fundamentally flawed, and useless.

Operations generate internal profits so long as they cost less than they make in returns. And these operations go on as long as they keep making profits. 

The thing with operations using overt violence is that they generally create incentives for retaliatory measures from those who are getting exploited. These measures create costs that eventually force these operations to shut down or adapt their predatory and parasitic tactics. And that's what they do.

You, like many libertarians, is under the delusion that somehow in some near but unspecified future, there won't be economic opportunities to those who live from exploiting other people to thrive.

I'm not saying that this is an impossibility, I'm just saying that this is very unlikely.

More likely is that the strategies of co-operation and exploitation keep evolving in tandem, like they've always did in any evolutionary games system.

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Malachi replied on Wed, May 1 2013 5:53 PM

I'm perfectly aware

then youre doing it on purpose, vindicating my earlier assessment of you as a troll.

But I don't want to discuss semantics

then use the word correctly or not at all. 

Power to generate violence is an economic resource, and violent interactions are economic interactions that follow economic patterns. People will resort to violence whenever they judge it to be the less costly way to get what they want. And since sometimes it is indeed less costly to get things by coercion, violence is put to use.

above I have bolded the part where you tried (yet again) to petitio principii. 

And I've been showing plenty of examples of that.

you have been much less willing to discuss the actual examples and what they mean. 

At any point I've defended that a particular form of violence is a "reliable" or "long term sustainable" way of getting things done.

yes, youre very confused, you assume that its reliable and sustainable enough to be around forever, then you insist that you have not said such a thing.

The decision maker who's contemplating the use of violence is generally not thinking about the very long run of human institutions. He's thinking about how he can get some very precise thing done, and how much is it going to cost him to do it.

you say "precise" but I dont think you know what it means, since if you use violence to achieve something, and I do not use violence to achieve something, we have achieved very different things. not "precisely" the same thing.

You can not come with a one-size-fits-all proposition that violence is never effective,

isnt it funny how you would rather vomit forth any manner of strawman instead of responding to my points or answering my questions? my point has always been that you do not examine the context and necessary effects of violence, you simply assume its effectiveness for any end you happen to select.

And those are two classes of economic interactions for which we do have a somewhat clear idea of third party impact. For most we don't, it's all very non-linear and complicated.

youre refusing to try to understand so you can mash it all together and pretend there isnt a distinction between violating someone's rights and refraining from that behavior. I'd explain it to you but you dont appear to want to understand.

Your holistic notion of "economic profit", in a sense of a positive gain for the whole society, is not only not used in practice, it is fundamentally flawed, and useless.

shut your filthy troll mouth, you are well aware that is a strawman.

You, like many libertarians, is under the delusion that somehow in some near but unspecified future, there won't be economic opportunities to those who live from exploiting other people to thrive.

I'm not saying that this is an impossibility, I'm just saying that this is very unlikely.

so you did backpedal after all. you are indeed learning. good.

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you have been much less willing to discuss the actual examples and what they mean. 

So far in this topics I've mentioned or briefly discussed the economics of:

- bank robbing, 

- contract killing, 

- cart theft,

- air polluting industry 

And on the other topic I've addressed loan-sharks and bookmaking mobster enforcement, slavery, and a few others I don't remember.

All of which forms of "private sector" coercion and externalization of costs, for which there are markets with clients and organized producers, vendors and whatever.

None of which seemed to have interested you. But you can always pick one and tell me why it's not coercion, or why it's not profitable.

Oh, yeah, you've told me already. By your definition, profits should not involve coercion, otherwise it's something else.

Therefore, you're right, because you've defined yourself right.

yes, youre very confused, you assume that its reliable and sustainable enough to be around forever, then you insist that you have not said such a thing.

Alright, let's slow down a bit.

I've never said a particular form of violence or coercion is reliable or sustainable enough to be around forever.

But that's true even for an ice-cream recipe. Nothing is a reliable source of profits for ever. Everything gets obsolete.

So let me repeat one more time just for the sake of clarity: I never took eternal reliability as my criterion. That's a stupid criterion by the way.

That doesn't mean that some other forms of violence and coercion won't be around in the future when the current ones get obsolete.

Like computer viruses, these things evolve with time. 

And just as incapable as you are of forecasting the exploitative mechanism of a computer virus of 2037, you are of describing today what will be the profiles of socio-economic and political exploitation then.

You might make a few educated guesses but that's all.

Is that such a hard idea to grasp?

you say "precise" but I dont think you know what it means, since if you use violence to achieve something, and I do not use violence to achieve something, we have achieved very different things. not "precisely" the same thing.

You're telling me that there are no two alternative possibilities of getting the same practical result, because one course of action create a different world than another course of action.

That's one of those pseudo-profound platitudes we hear people say.

The thing is quite simple though: you want some immediate result, say an apple. You can either steal it or pay the price for it. Each decision bear a cost/risk and sometimes it is rational to chose one and other times is rational to chose the other.

Of course you can get all metaphysical about it, but it is as simple as that.

isnt it funny how you would rather vomit forth any manner of strawman instead of responding to my points or answering my questions? my point has always been that you do not examine the context and necessary effects of violence, you simply assume its effectiveness for any end you happen to select.

I've never said that overt violent actions don't have likely consequences, but the decision takers who rationally opt to engage in violence also know that, and do their cost-effectiveness analysis considering those likely consequences.

youre refusing to try to understand so you can mash it all together and pretend there isnt a distinction between violating someone's rights and refraining from that behavior. I'd explain it to you but you dont appear to want to understand.

I'm glad you've introduced the word "rights" in this debate, I was waiting for it.

Some people talk about rights as if they were some sort of cosmical presence.

"Rights" are simply the claims that some individuals agents make that most other individuals agents think they are able to secure somehow.

You don't have rights you are not able to secure. And that's precisely why violence happens, because someone thinks some other part is not in position to prevent his exploitative maneuvers.

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Malachi replied on Fri, May 3 2013 8:19 PM

You're telling me that there are no two alternative possibilities of getting the same practical result, because one course of action create a different world than another course of action.

I am telling you that in practice, a different world is a different practical result. you cant escape causality by hiding elsewhere and pretending things dont matter. youre an ostrich.

The thing is quite simple though: you want some immediate result, say an apple. You can either steal it or pay the price for it. Each decision bear a cost/risk and sometimes it is rational to chose one and other times is rational to chose the other.

youre employing fuzzy language. if you want to own an apple and avoid a dispute with someone, you have to buy or or hold out your open palm until someone gives it to you. if you dont care about ownership rights and just want to consume an apple, you have to find an unsecured or unowned apple. two different causes, two different effects. as you might imagine, the circumstances that permit theft are temporal in nature. so your belief that one could always steal apples is an article of faith.

I've never said that overt violent actions don't have likely consequences, but the decision takers who rationally opt to engage in violence also know that, and do their cost-effectiveness analysis considering those likely consequences.

good. so you agree that those decision makers would decide not to engage in violence if their cost-effectiveness analysis gave them a negative mathematical expectation?

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Caley McKibbin:
if you want to own an apple and avoid a dispute with someone, you have to buy or or hold out your open palm until someone gives it to you. if you dont care about ownership rights and just want to consume an apple, you have to find an unsecured or unowned apple. two different causes, two different effects.

 

Holy shit, what a bunch of crap.

You only care about "ownership rights" of an apple insofar as these rights create more prospective costs/risk for your prospective seizure of this apple than the reward of getting the apple itself would justify.

Think of intellectual property rights. The fact that the risk/cost of being prosecuted by unlawful download is very low, which makes many people resort to these.

I gotta go now, but later I'll be back to correct you on the other atrocities you've said.

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Malachi replied on Sat, May 4 2013 11:48 AM

You only care about "ownership rights" of an apple

as they are unable to petition for rights, apples currently have none.

You only care

is it possible for you to make a rigorous argument instead of assuming things about what I care about?

You only care about "ownership rights" of an apple insofar as these rights create more prospective costs/risk for your prospective seizure of this apple than the reward of getting the apple itself would justify.

if we take "ownership rights of an apple" to mean the rights of the apple owner, we can evaluate your statement. the outcome of physically possessing an apple to which there are multiple claims is a different outcome than physically possessing an apple and holding the sole claim to said apple. 

insofar as these rights create more prospective costs/risk for your prospective seizure of this apple

surely you are willing to admit that one necessarily would care insofar as they believe those rights to create more prospective risk in general? I see no reason why one's calculation is necessarily confined to the immediate circumstances and no further. and, if that is the case your describe, then sure you see why those apples arent going to be available forever.

Think of intellectual property rights. The fact that the risk/cost of being prosecuted by unlawful download is very low, which makes many people resort to these.

does anyone refrain from pirating data for any reason other than the fear of prosecution?

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Malachi replied on Sat, May 4 2013 11:49 AM

ps, I am not Caley.

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I am telling you that in practice, a different world is a different practical result. you cant escape causality by hiding elsewhere and pretending things dont matter. youre an ostrich.

It's not that.

Sometimes a guy can be in a situation where resorting to violence is very rational for him.

Say he owes money to some mafia guys, and they're gonna come after him. If he doesn't make some cash real fast he's probably gonna get wacked. And he can't go to the police because the thugs would them go after his family, and them manage to get him killed in jail.

But what he can do is try to pull some robbery or kidnaping or other crime like that, as a gamble that could save his life.

Say that in ordinarily he would not consider these jobs worth the hassle, but right now he has a pretty urgent need for cash, so his risk/reward ratio gets pretty skewed.

All of the sudden it becomes rational to try out something like that, all things considered.

Unless he believes in karma or some other woo-woo shit, he'll go for that.

So you can't come and say that just because there are expected consequences for acting in violation of what is moral or legal or rightful or whatever it is not rational to do it anyway.

All things considered, breaking the law can still be one of the most effective solutions in certain circumstances people find themselves in.

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Malachi replied on Sat, May 4 2013 1:17 PM

I am telling you that in practice, a different world is a different practical result. you cant escape causality by hiding elsewhere and pretending things dont matter. youre an ostrich.

It's not that.

not what? can you be more specific and identify what part of my proposition you have a problem with?

Sometimes a guy can be in a situation where resorting to violence is very rational for him.

shared premise. lets move on.

Say he owes money to some mafia guys, and they're gonna come after him. If he doesn't make some cash real fast he's probably gonna get wacked.

and he created this debt without contemplating the potential consequences and how to respond to them. right. sure it could happen. it could also happen that he was prepared to leave with his family at a moment's notice, and so he has an alternative to violence. which is exactly why, when you find a scenario where violence seems to achieve a material gain (or avert a material loss) then you need to examine the circumstances that make it so.

Say that in ordinarily he would not consider these jobs worth the hassle, but right now he has a pretty urgent need for cash, so his risk/reward ratio gets pretty skewed.

say that all his prospective victims have defenses that are more certain to kill him than the mafia? what happens to his risk/reward ratio then?

All of the sudden it becomes rational to try out something like that, all things considered.

all things considered, this scenario has a negative mathematical expectation so I dont consider it systematic, but anomalous. in any case you implicitly acknowledge the ideological component here:

Unless he believes in karma or some other woo-woo shit, he'll go for that.

so unless he has a different system of ideas (different from the system you assume him to have) then he will do what you say he will do, and not other courses of action open to him. got it.

So you can't come and say that just because there are expected consequences for acting in violation of what is moral or legal or rightful or whatever it is not rational to do it anyway.

either they will be mindful of consequences or they will be subject to them. the nth order effect of this is to promote catallacty and diminish the occurrence of coerced interaction, because consequences are real. to deny the above is to deny causality.

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I dont understand the philosophy of being attacked by one person. I have so many reasons not to do this work, but i m still doing it. I was very charming and handsome when i got this tension i lost my every thing .

but some thing just came out form no where like this promotiefilm

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good. so you agree that those decision makers would decide not to engage in violence if their cost-effectiveness analysis gave them a negative mathematical expectation?

Not exactly, but something like that.

A game like roulette has a "negative mathematical expectation" for every player (except the house), when computed in terms of how much chips a best cost, how much chips you are supposed to gain from a bet, and the probability of this event happening.

Nonetheless many people play the roulette.

Some people might be under the impression that they have some luck factor.

Other people might be seeking just the thrill or the bragging rights that come with putting money on stake.

But for a class of people, it is rational to play roulette, given their particular situation, external to the game.

Like in the example above, if they need to multiply their cash fast, because there's an open opportunity for an "sure-thing" investment but they don't have neither the capital nor the credit, or if they, like in the example above, owe money to mobsters and don't have enough, their particular will adjust the mathematical expectation of the roulette game they're playing.

Now, if they win, they don't simply earn a number of chips, they earn the right to participate in a profitable venture, or the right to buy some time.

And if they loose their situation doesn't change much, as they've lost the chips they used to make the bet.

So, as you can see, this mathematical expectation thing is not wrong, but only after you have considered the specific opportunity costs people are facing when taking decisions.

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Malachi replied on Sun, May 5 2013 6:34 AM

A game like roulette has a "negative mathematical expectation" for every player (except the house), when computed in terms of how much chips a best cost, how much chips you are supposed to gain from a bet, and the probability of this event happening.

and if they play roulette and lose, they will be at an economic disadvantage to people who engage in behavior with a positive mathematical expectation. thus, they will be outcompeted by those people to the extent that they play roulette, in the long run.

Some people might be under the impression that they have some luck factor.

that sounds like an idea or system of ideas that affects their calculation. if they are right, then they will be successful and reinforce this belief. if they are wrong, then they will be unsuccessful and the strength of this believe will diminish.

Other people might be seeking just the thrill or the bragging rights that come with putting money on stake.

psychic profit.

their particular will adjust the mathematical expectation of the roulette game they're playing.

no, it adjusts the mathematical expectation of the other courses of action open to them. the odds/payoff/etc. of roulette do not change. do you know what mathematical expectation is?

So, as you can see, this mathematical expectation thing is not wrong, but only after you have considered the specific opportunity costs people are facing when taking decisions.

thats pretty much what I wanted you to understand, so good job.

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It will adjust the mathematical expectation of the game, because now the scenarios "win" and "loose" have gains beyond the money value of the chips won or lost.

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Malachi replied on Sun, May 5 2013 6:50 AM

that is properly described as part of the individual's circumstances, it doesnt become a part of roulette. winning at roulette doesnt make the business venture more likely to be successful, or less likely to be successful. it may enable the practice of the business venture, which then has its own mathematical expectation.

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Correct, but it makes the decision of playing the roulette by that particular individual at that particular moment a rational decision.

The regular odds of the abstract game of roulette does not change, but the "implied odds" of that particular instance of roulette are favorable.

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Malachi replied on Sun, May 5 2013 6:59 AM

ToxicAssets was kind enough to elaborate my two main points in his own words, so heres a brief summary of my position on this subject:

I've never said that overt violent actions don't have likely consequences, but the decision takers who rationally opt to engage in violence also know that, and do their cost-effectiveness analysis considering those likely consequences.

So, as you can see, this mathematical expectation thing is not wrong, but only after you have considered the specific opportunity costs people are facing when taking decisions.

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Malachi replied on Sun, May 5 2013 7:02 AM

Correct, but it makes the decision of playing the roulette by that particular individual at that particular moment a rational decision.

The regular odds of the abstract game of roulette does not change, but the "implied odds" of that particular instance of roulette are favorable.

no, because the mathematical expectation of roulette is what is rationally used to compare roulette against other games. the need for $50,000 doesnt make it more beneficial to play a game with negative mathematical expectation, it just establishes the marginal unit at $50k/(time until deadline).

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I agree, the baseline odds of the roulette game are important when you're calculating your implied odds that determine the benefits of entering the game or not.

But you're making unnecessary over complications when you start considering other games.

I'm not saying that roulette will be necessarily the best solution for every guy in such a situation. If the guy happens to be a professional poker player, he's probably better of trying to win a smalltime poker tournament with lots of fish, if there's one available. Same thing if he can count cards in twenty-one without being caught.

But since most guys are probably fish, odds will be even more skewed against them when playing these "skill" games, so most guys in need of fast cash would probably opt for the roulette (or similar things, like crabs).

In any case, that's largely besides the point here.

The point is how people rationally take decisions using the implied odds of that decision within their situations, and not the abstract generic odds such a decision might have per se, which give only a baseline for the computation of the implied odds.

Poker players need to understand this implied odds when they calculate their calls and raises.

Some pot-odds will not look very rewarding if you have few possible outs in a hand, but these outs might give you a concealed nuts which will allow you to rip off the other guy in the last betting rounds.

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*final betting rounds

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Malachi replied on Sun, May 5 2013 7:42 AM

But you're making unnecessary over complications when you start considering other games.

rational actors consider alternative courses of action. the entire point of the odds is to compare different courses of action and their likely effects. the entire point of our discussion is a comparison of different courses of action, and you concede that for a rational actor it comes down to what means is right for his ends, and you suddenly dont want to compare means?

The point is how people rationally take decisions using the implied odds of that decision within their situations, and not the abstract generic odds such a decision might have per se, which give only a baseline for the computation of the implied odds.

this seems like an obtuse way of obfuscating the fact that a rational actor will use the mathematical expectation of roulette to compare its relative merits to other games of chance. obviously the mathematical expectation of a skill-based game will have a subject-dependent component (in the same way a professional cat burglar might have a positive expectation for a robbery that an amateur would have a negative expectation for).

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Malachi replied on Sun, May 5 2013 8:45 AM

just to clarify, if someone needs $50k or they will suffer unfortunate consequences, the marginal unit is $50k/{all opportunity spaces}, that is "Fifty thousand dollars divided by the set of all opportunity spaces" meaning that if someone has fifty opportunities to play a game, he would rationally only choose games that have a mathematical expectation equal to or greater than one thousand dollars per opportunity to bet. rationally speaking, a lesser mathematical expectation is not worth the opportunity cost.

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rational actors consider alternative courses of action. the entire point of the odds is to compare different courses of action and their likely effects. the entire point of our discussion is a comparison of different courses of action, and you concede that for a rational actor it comes down to what means is right for his ends, and you suddenly dont want to compare means?

It's not that I don't want to compare means, it's that I don't want to overcomplicate the scenario unnecessarily.

My point was only about someone contemplating the decision of entering a game of roulette or not entering a game of roulette.

And if this guy has some urgent need for fast cash, and if he has no alternative way of raising cash at a lower risk, it might be rational for him to enter. 

Even if his expectation of wining in the game is negative (like all roulette games), he's not better of if he doesn't play.

Say he's in debt with mobsters, for 10 grand, and he has only 5. Say the mobsters will kill him if he shows up with less than the 10.

If he puts 5 on red he has a probability of slightly less than 50% of making 10 grand, and slightly more than 50% of loosing it all.

Say the only decision available is to play or not to play. He doesn't have a lot of options, he doesn't know how to play the other games nor how to raise 5 grand overnight by any other way.

In this scenario, he has interest in playing the game.

His situation is atypical, he has a convex utility function. He values having 10 grand much more than twice the value he gives for having only 5, which would be the case if he didn't play the game. 

If he wins, he can pay the mobsters and live. If he loses, he's done. And that's the same result if he'll get if he doesn't play the game.

So the gamble is justified, in terms of expected utility, but not of expected money figure.

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Malachi replied on Sun, May 5 2013 8:52 AM

I think we are done here, unless you have something else to say.

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Malachi:

I think we are done here, unless you have something else to say.

I see,

The mathematically savvy reader probably has figured it out already, but the last post was a bit too technical, with convexity and utility functions. When I have more time in my hands I'll comeback and make a more detailed explanation for lay people and you will understand what's going on.

Don't give up though, you're showing some progress...

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The whole point with rational expectations theory is that the decision maker will take a gamble if it maximizes his expected utility, and not necesseraly his expected money gains.

If his utility function is convex, he'll take gambles with negative expected monetary returns, that will have positive expectation in utility terms.

And this is the case of certain people facing urgent problems.

 

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It would be cool if a moderator reading this could split this whole discussion of expectation and probability to another thread because it's kinda of a side issue here, and it's an interesting point that many people get confused about, like malachi.

It could start at my post just after the "markmerich" post (which by the way is a scam-bot).

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Malachi replied on Sun, May 5 2013 9:10 AM

The whole point with rational expectations theory is that the decision maker will take a gamble if it maximizes his expected utility, and not necesseraly his expected money gains.

My statement is still meta to yours. if you reduce the set of all opportunities to one, and the marginal unit becomes $50k, and you only give the guy the choice between no mathematical expectation, and death, or negative mathematical expectation and the minor chance of living, then he is going to choose the least worst option. whats your point?

that will have positive expectation in utility terms.

the negative mathematical expectation still mens that people who make this decision will suffer a loss over the long run, which means they will be outcompeted by people who make bets with positive mathematical expectation.

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Malachi replied on Sun, May 5 2013 9:12 AM

It would be cool if a moderator reading this could split this whole discussion of expectation and probability to another thread because it's kinda of a side issue here,

actually rational expectations is central to questions of defense.

and it's an interesting point that many people get confused about, like malachi.

do you even know what mathematical expectation is?

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I've split the debate about rational expectations to another thread, you might want to check it out:

http://mises.org/community/forums/t/33439.aspx

 

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Malachi replied on Mon, May 6 2013 7:07 PM

I can understand why you might want this discussion to disppear down the memory hole. 

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