Friday, 1 March 2019

Incentives matter

Many people don't learn without some reward or penalty. People with inconsistent preferences will probably modify them if you try to turn them into a money pump. But not always! E.g. gambling addicts.

Markets aren't magic. They need to be trained, by eliminating stupid participants. Correct odds in gambling were achieved by evolution, millennia before probability theory was invented in the 17th century. However, knowledge of probability did give people like John Law an edge in certain less well-established games.

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