Comments on: Kelly Bets and Education Policy

By: Crooked Timber » » Any sufficiently advanced punditry is indistinguishable from bollocks

Thu, 22 Sep 2005 23:38:48 +0000

[...] No matter how ludicrous your predictions, if they are sufficiently wildly utopian, then your thinking has a greater expected value than anyone else’s (see here for the general idea). Thus, if Kurzweil reckons that we will upload our consciousness onto software and live for ever as pure energy on the internet, then I say all that and a pony too! Not just any old pony by the way, but a super technonanopony! Which eats racism and shits pure gasoline … on the internet! Oh yeh and we will constantly be having multiple orgasms … and not just the normal kind either (more details to come). You might say that it’s pretty unlikely and I’ve failed to spell out important details, but as long as there is at least some probability that I’m right, then I am more important than Ray Kurzweil to the tune nU^(-rT), where U is the utility of a magic pony, n is the probability I’m right, r is the discount rate and T is the time it will take to sort us all out with one. Keep reading CT folks, because in expected value terms, it is only going to become more important!! (this is mainly a cheap shot at Kurzweil and the other nanocyberAIscifitechnoutopiaboosters, but the serious underlying point is that there is a difference between probabilistic and speculative uncertainty and the expected value rule doesn’t work well at all in contexts where probabilities don’t make sense. I’ve argued here and elsewhere that the difficult kind of uncertainty is much more common and the easy kind much less common than is generally supposed, and that this poses big problems for the decision theory models which under most of economics) posted on Thursday, September 22nd, 2005 at 6:38 pm Post a comment [...]

By: Gavin

Gavin — Fri, 30 Jan 2004 08:50:25 +0000

A couple of minor points: since the actual impact of the plan is 9k of extra for those with family incomes above a certain level, then 9k is the appropriate wager for the Kelly bet. Also, since the plan improves the situation of people from the lowest income families, that also takes a lot of people with no assets out of the betting pool. And when it comes to assessing assets for the Kelly bet, I’d be inclined to think about including parental assets too, as well expected future (non-university education) incomes. This is all just an empirical question really – so why don’t we all just wait and see what happens to student enrollments? If Daniel is right, then enrollments will fall dramatically. If not, they won’t. I’m inclined to the latter myself.

By: bill carone

bill carone — Wed, 28 Jan 2004 15:28:00 +0000

Anurag, “The future is uncertain in ways that are different from his personal information about the present.” I’m not sure I follow this; he has imperfect information about the present, imperfect information about the past, and imperfect information about the future. There is a lot known about the future, and a lot not known about the past and present, no? “Would you follow a similar path to placing a bet on what the desk he’s using in 27 years might weigh?” I think so; the resulting distribution would have to be wider, implying that he has much less information about his future desk than his present desk. But he still has some (it probably doesn’t weigh 4000 kilos; I’d bet against it, so I have some information about it). We might have to define “desk” more carefully (what if the buildings of the future simply use nanotech to create whatever furnishings you need at the moment you need them? Impossible? Maybe, but I certainly don’t know enough to claim it would be impossible.). We might also need to add new distinctions: for example, we could assess his probability that he is working in academia in 27 years. We could then assess a distributions given “yes” and “no” answers to that question, then calculate the overall distribution, not given that information. We could add any number of distinctions to help him think more carefully about the future. This happens a lot in business; the price of oil in 27 years might be of great importance, and we might add 20 or 30 new distinctions in order to get a high-quality assessment. Note that the questions I ask (“Would you prefer A or B?”) do not allow the answer “I don’t know.” I’m asking, right now, given everything you know about the world, which deal you choose; you don’t have to know anything about probabililty for me to encode your information. Sometimes I use the following way to get someone’s mind engaged. “We have access to a clairvoyant, and she knows exactly how much your desk will weigh in 27 years. She has given me this piece of paper (I show it) with the answer written on it. Now choose, and we will look at the paper to see, right now, if you win or not. Note: you will immediately forget this after our conversation (you can’t alter the future based on this information).” So, short answer, I would use very similar techniques in both cases; the uncertainty is higher about the future than the past, but it is essentially the same kind of uncertainty, and can be encoded into a probability distribution.

By: Idiot/Savant

Idiot/Savant — Wed, 28 Jan 2004 04:25:41 +0000

New Zealand has had a similar scheme for 12 years now. Universities get to set their own tuition fees to make up for being underfunded by the government; the government provides loans to cover fees, course costs and living expenses; repayment kicks in at the minimum wage. What’s it done? Here’s some factoids: * Fees have increased from NZ$1000/yr when introduced to on the order of NZ$4500 today (and a lot more for med students and dentists). Having given institutions the power to set their own fees, the government is now trying to stop further increases, by threatening to deny increased funding to any institution that does. * Vastly more people are going to uni, and from a greater range of social backgrounds. Part of this is because the government is funding more places (at a lower rate per head), and partly it is because of a growing realisation that you need a degree if you want to be anything other than a McProle (hinted at by Conrad B above). * Graduates face enormous debt burdens (mostly due to living expenses – the introduction of fees was combined with the elimination of student allowances for all but the very poor, meaning many students have to borrow for food); as a result they are deferring getting a mortgage and having kids until much later in life. This is a dramatic change in the kiwi lifestyle. * More graduates are working overseas to repay their debts. This is an attractive option for Kiwis (who have a long OE tradition as well as a weak currency), but we’re not sure yet how many are coming back. * Fewer people are training as teachers and nurses, because the wages in those professions will never repay the loans. Instead, they’re training as lawyers and accountants. * Even high-paid government policy analysts are looking at not being able to repay their loans until after they retire. * On the plus side, because the loan is forgiven if you die, more pensioners are spending their golden years in study.

By: Anurag

Anurag — Wed, 28 Jan 2004 04:20:41 +0000

Bill, On your point on D^{2’s desk, I think the difference is that we can expect that D}2 has good information on what it’s weight is. That’s pretty different from estimating what 10% of his income 27 years from now might be. The future is uncertain in ways that are different from his personal information about the present. Would you follow a similar path to placing a bet on what the desk he’s using in 27 years might weigh?

By: Conrad barwa

Conrad barwa — Tue, 27 Jan 2004 18:15:08 +0000

Well, less than an hour to go before the vote and I wonder whether anyone would care for a wager? My bet is that Blair will squeeze through at worst, with a few votes majority and stroll by with a safe margin if he is lucky?

By: bill carone

bill carone — Tue, 27 Jan 2004 15:18:43 +0000

“Absolutely disagree. I don’t think you can sensibly assess even a mean and variance. Business decisions get made on the basis of animal spirits.” I guess I’m not sure what you mean by “sensibly” or “animal spirits” Let’s say I want to assess your information about, say, the weight of your desk in your office. You don’t know this, right? Let’s say I’d like to give you a chance to win $10,000 from me, and I give you a choice: A. Win $10,000 if you can call a coin flip correctly, or B. Win $10,000 if the weight of your desk is over 100 kilograms. Which would you prefer? If you prefer A, then your probability of your desk being over 100 kilos is less than 50%. If you prefer B, it is greater than 50%. So, I have at least put bounds on a probability that represents your personal information about the weight of your desk. You can imagine how I could zero in on your probability of “greater than 100 kilos” and how I could get a complete probability distribution for any weight. What part of this is “unsensible” or based on “animal spirits”?

By: Rich

Rich — Tue, 27 Jan 2004 15:07:27 +0000

> They write the debt off after 25 years. Otoh, £5.30/week is £275.60/year which is about 2% of your disposable income if your salary is £15k, which isn’t nothing. So what’s the point in making someone pay so little towards the debt? If it doesn’t cover the interest/inflation, and is going to be written off in 25 years, why not write it off straight away and save the poor hypothetical bugger 25 years of being £20,000 in debt? Or at least start the payback at a level that pays the debt off in a finite time.

By: dsquared

dsquared — Tue, 27 Jan 2004 13:12:09 +0000

They write the debt off after 25 years. Otoh, £5.30/week is £275.60/year which is about 2% of your disposable income if your salary is £15k, which isn’t nothing.

By: Chris Bertram

Chris Bertram — Tue, 27 Jan 2004 11:56:51 +0000

Except, Rich, that another part of the proposal is to write off any remaining debt after 25 years.

By: Rich

Rich — Tue, 27 Jan 2004 11:53:07 +0000

> aside from cracks about buying from catalogues, what’s your take on the figures Chris cites? Are the figures wrong, somehow? Are they misleading? If you’re attempting to repay a £20,000 loan at £5.30 per week – even assuming no interest at all – it’ll take you 72 years to repay the whole lot. If you take into account any interest rate over 1.3% pa, your capital just increases and you get further into debt. So I, at least, think they’re misleading.

By: Ruth Hoffmann

Ruth Hoffmann — Tue, 27 Jan 2004 08:01:40 +0000

they’re are being asked to stump up the price of 2 pints of lager or one packet of cigarettes on a weekly basis. Most students of my acquaintaince — even “scruffy kids” — do not seem deterred from such expenditure. But you don’t take into account the other point D^2 raised: the full amount of the debt will still count against that person’s borrowing ability. From personal experience, I can tell you that “sure I’ve got $22K in student loans, but it’s on an income-contingent repayment plan” made no difference to the bank counting the whole debt against me in my attempt at mortgage qualification. And they did the same thing to the MN lottery that they did in MI. So not to be snarky, but you may want to take a good hard look at the kind of debt load US students are carrying these days, and how much (and how fast) it’s increased since the program was implemented, before you start down that road yourselves.

By: dsquared

dsquared — Tue, 27 Jan 2004 07:10:57 +0000

To all of these questions, the answer “I don’t know” is identical to the answer “I can assess a probability distribution for it.” Absolutely disagree. I don’t think you can sensibly assess even a mean and variance. Business decisions get made on the basis of animal spirits.

By: ahem

ahem — Tue, 27 Jan 2004 05:04:55 +0000

The obvious free-market solution is to bring back the old-fashioned custom of indentured servitude. I’m sure certain Oxford colleges would jump at the chance to reintroduce the old-style ‘Commoner’, whose fees were offset by performing service duties (a university version of ‘fagging’) during their degrees.

By: ahem

ahem — Tue, 27 Jan 2004 05:00:14 +0000

On the other hand the bill seems to create an incentive to emigrate – get the free university education, emigrate and refuse to pay afterwards. You’d be surprised at the lengths that the current Student Loans Company goes to address the rising number of people who do just that.