Is Using Someone's Reason Against Them Fraud?

[Ellen Stuttle]

Separating sections. I have bad eye troubles and can't deal with long posts.

I'm guessing you haven't read much Objectivist literature. Start with Galt's Speech. Rand identifies many evils - with failing to make the effort of thinking being the root evil. Maybe you're confusing rights violations with the whole range of evils. Rights violations are a special subset which Rand held are justifiably made illegal, but she certainly didn't equate the illegal with the entire range of the immoral.

I recognize that force and fraud can be used against oneself, and most of the evils Rand lists that are not perpetrated against others are forms of self-deception in one way or another.

No, force and fraud can't be used against oneself. As to "self-deception," that's an iffy term. One can't literally lie to oneself - that is, try to convince oneself that something is true which one simultaneously knows isn't true (or the reverse, that something isn't true which one simultaneously knows is true). In order to "deceive" oneself, one would have to avoid letting oneself be aware of what one could know if one weren't avoiding knowing. The root evil, according to Rand, is the refusal to make a mental effort to be aware.

Ellen

[Ellen Stuttle]

They start out, as you described the hypothetical, expecting to make a large return with no effort.

They have to expend money in order to make money. They had to get the money somehow. I wouldn't call that "no effort". And if risking or spending money to get money is getting something for nothing, is investing in business similarly irrational?

They maybe made an effort in the first place to get the money they're gambling. But in the scene you describe, what they're hoping for is a windfall on someone else's foolishness.

Investing in business is investing in expected productive activity.

They then proceeded, as you described the escalation, to act like dopes in my opinion. If they were going to gamble that the other person was going to stop early and figured they were willing to lose a dollar or a few for the sake of a potential substantial (percentage-wise) return, then they should have stopped after the betting continued beyond a few dollars' loss, just accepting the loss instead if hoping to recoup.

But at what amount, specifically? That's kind of the rub. Even though it is better to stop at some point before they run out of money, it is in the players' rational interest to keep bidding at every single point of the game.

I don't see any rational interest in keeping bidding at every single point of the game. Not beyond some small amount which the person decides upon in advance as a limit. I think, by your reasoning, that a person having lost a dollar on a lottery ticket would be considered rational to proceed to lose everything he/she possesses trying to win.

Ellen

[Brant Gaede]

Of course it's an answer. It's just I'm not talking your game and you're not talking mine. While you started this thread, you do not control it.

--Brant

If your game involves posting platitudinous nonsense instead of rational argument then I want no part of it.

Any excuse you need, go right ahead.

--Brant

[Darrell Hougen]

Why isn't it reasonable to suppose that they could have predicted it? My 9-year-old son could have predicted it, and he's only just now learning long division. If a third grader's basic math skills could work that out, I don't see why I couldn't expect the same of Bob and Alice. I think you don't give poor Bob and Alice nearly enough credit for being thinking folks.

I explained why in my response to selene. But I'll explain why in more detail here:

At the beginning of the auction, Alice bids $1, because she thinks that there is a 50% chance that Bob will drop out and she will get $19. There is also a 50% chance that Bob will bid $2 and win the auction, in which case she loses $1. Her expected gains for bidding on the first round is 0.5*19 - 0.5*1 = $9, while her expected gains for not bidding at all is $0. Thus, she should bid $1 on the first round. Similarly for Bob. Since Alice has already bid $1, he needs to bid $2 to win. If he does, his expected gains are 0.5*18 - 0.5*2 = $8, which is more than if he doesn't, i.e. $0.

This goes on and on until the bid is at $10. At this point, Alice reasons, well if Bob bids more than $10, then his expected gains would be negative, so he won't bid more than $10, and Alice can certainly win the auction by betting $11 and getting $9. Bob, of course, is thinking the same thing and so he tries to bet more than $10.

Once the bid reaches $20, the same reasoning applies as in the first paragraph, except in this case each player is trying to minimize his losses. But by that point, Carl has already won.

I should also point out that there is another error in the reasoning above. It is rational to make an investment if a person's future expected profit is greater than what he would expect to gain from some other investment. But, as soon as Bob or Alice recognizes the nature of the game and thus of the trap, they each can see that it is not in their interest to continue to bid higher (unless they know they can win).

Part of the problem is the assumption of a 50% probability that the other party will drop out after each bid. In fact, it is impossible to know the probability of the other party dropping out. I know that in the case complete ignorance, it is standard to assume a probability of 50%. However, that isn't always sensible. In fact, if both parties assume a probability of 50% of the other party dropping out, then paradoxically, the probability of either party dropping out is nearly zero.

If we assume a probability of 5% that Alice will drop out after the next bid, then if Alice had bid $1, Bob's expected payoff from bidding $2 would be 0.05 * 18 - 0.95 * 2 = -$1.00. So, if Bob were a little smart about how he decided to bid, he might never bid.

Darrell

[Selene]

Darrel:

She just does not get how to critically analyze a problem, or, she is practicing sophism, or, it is a troll.

If this thread was a fifteen (15) round fight, it would have been stopped in the third (3rd) round.

I think Ellen has clearly stated that she does not seem to know even the "outline" of Objectism.

Great analysis by both of you folks by the way.

A...

[Mikee]

I think we've been had...

[Darrell Hougen]

Darrel:

She just does not get how to critically analyze a problem, or, she is practicing sophism, or, it is a troll.

If this thread was a fifteen (15) round fight, it would have been stopped in the third (3rd) round.

I think Ellen has clearly stated that she does not seem to know even the "outline" of Objectism.

Great analysis by both of you folks by the way.

A...

Adam,

I'm not quite so negative. I think Naomi might have stumbled upon this question on a mathematics/statistics website and wondered about the ethical implications of the game. Now that I've pointed out how to avoid the "inescapable conclusion" implied by the faulty mathematical/probability assumptions, I'll be interested to see what she has to say.

Darrell

[Selene]

I'm not quite so negative. I think Naomi might have stumbled upon this question on a mathematics/statistics website and wondered about the ethical implications of the game. Now that I've pointed out how to avoid the "inescapable conclusion" implied by the faulty mathematical/probability assumptions, I'll be interested to see what she has to say.

Darrell

Fair enough...my NY City street senses went into the red zone with her/it because of other threads that she/it has appeared at also.

And, you are a much nicer person than I am.

[SoAMadDeathWish]

Hi Naomi,

Welcome to OL.

I think the problem is your analysis of what is rational behavior. Your premise is that Bob and Alice must participate if they are rational because your reasoning shows --- I didn't follow your link --- that they are always better off if they continue the game then if they don't. I think that reasoning is faulty.

For example, the original problem doesn't say how large a bid can be, so why wouldn't Alice, if she went first, bid $19 or $19.99? Then, it would be impossible to Bob to place a bid that would allow him to profit, so he wouldn't bid and Alice would win and Carl would lose ($1 or $0.01).

My objection here is that Alice cannot know how Bob will choose between two options he values equally. If he expects to gain nothing by participating and also nothing by not, then he may still choose to participate. This would give Alice an expected utility of 0.5*0.01 = 0.005, whereas bidding just $0.01 gives her an expected utility of 19.99*0.5 + 0.5*0 = 9.995. However, even if she knew that Bob would not participate if she bid $19.99, it still wouldn't resolve the issue, because then her expected utility would only be 0.01 which is still much much lower than the 9.995 she gets from bidding 1 cent.

Another possibility would be for Alice to say, "Hey Bob, I'll bid $1 and if you don't bid anything, I'll share the profit with you, 50/50." If Bob agreed, Bob and Alice would each come out $9.50 ahead and Carl would be out $19.

Another person in the thread tried a similar scheme. But it also fails because there is a powerful temptation to break the agreement. This is because, after they make the agreement, and Bob bids $1, then Alice can only expect to gain $9.50 if she keeps to the agreement, but she can expect to gain $18, almost twice as much, if she breaks it.

What is the fraud being committed in my example? The hypothetical software company knows that people are bombarded with licensing agreements all the time and don't have time or resources to read them all in detail every time. So, the hypothetical software company is taking advantage of the ignorance of the person installing the software in order to attempt to enrich its owners at the expense of unsuspecting clients. That is a type of fraud.

The question is, does the person entering into an agreement have a reasonable expectation that the agreement will be mutually beneficial to both parties? I think the answer is yes, with some caveats involving small amounts of money or entertainment related activities. If you didn't enjoy the movie, that's just too bad, etc.

Darrell

I'm inclined to agree with you that Carl is preying on Alice and Bob by taking advantage of the circumstances. My only comment here is that using someone's ignorance against them in this way doesn't seem to fit the usual definition of fraud. This is not a trivial issue since many people in this thread didn't think that any form of fraud was being perpetrated.

I should also point out that there is another error in the reasoning above. It is rational to make an investment if a person's future expected profit is greater than what he would expect to gain from some other investment. But, as soon as Bob or Alice recognizes the nature of the game and thus of the trap, they each can see that it is not in their interest to continue to bid higher (unless they know they can win).

Nonetheless, they have to, because, once they are in the game, they each expect the other to back down first because they still have to maximize their gains. And so, neither of them backs down even if they recognize that they are caught in an escalation game.

Part of the problem is the assumption of a 50% probability that the other party will drop out after each bid. In fact, it is impossible to know the probability of the other party dropping out. I know that in the case complete ignorance, it is standard to assume a probability of 50%. However, that isn't always sensible. In fact, if both parties assume a probability of 50% of the other party dropping out, then paradoxically, the probability of either party dropping out is nearly zero.

If we assume a probability of 5% that Alice will drop out after the next bid, then if Alice had bid $1, Bob's expected payoff from bidding $2 would be 0.05 * 18 - 0.95 * 2 = -$1.00. So, if Bob were a little smart about how he decided to bid, he might never bid.

Two problems here:

1) There is a slight error in your calculation, which should be 0.05*18 + 0.95*0 = 0.90, because if Alice doesn't drop out, it doesn't mean that Bob will lose $2, just that the game continues. What this also shows is that the probabilities that players assign are quite irrelevant to the outcome, because every nonzero probability of somebody dropping out leads to a positive payoff.

2) Why should anybody assume that there is a 5% probability that Alice will drop out after the next bid, rather than some other probability? We could, with just as much justification, assume that there is a 95% probability that Alice will drop out after the next bid. The point of assigning equal probability to all events in a state of total ignorance is to avoid leaving yourself vulnerable to exploitation.

[Selene]

Imprisoned in her/it's own presumptions about how any human behaves, be they rational, or, not.

Try selling that game to a ten year old kid from NY City, he will wind up owning you.

[SoAMadDeathWish]

No, force and fraud can't be used against oneself. As to "self-deception," that's an iffy term. One can't literally lie to oneself - that is, try to convince oneself that something is true which one simultaneously knows isn't true (or the reverse, that something isn't true which one simultaneously knows is true). In order to "deceive" oneself, one would have to avoid letting oneself be aware of what one could know if one weren't avoiding knowing. The root evil, according to Rand, is the refusal to make a mental effort to be aware.

Ellen

It doesn't matter. What matters is figuring out what Carl (or Alice or Bob) is doing wrong, if anything. To me it doesn't seem like any of them are refusing to make a mental effort to be aware, but the opposite.

They maybe made an effort in the first place to get the money they're gambling. But in the scene you describe, what they're hoping for is a windfall on someone else's foolishness.

How are you able to conclude that Carl is being foolish. All the evidence seems to suggest otherwise, as he certainly ends up making money off of his little scheme. On the other hand, Carl's values may not be the same as our own, as I've argued elsewhere, so we can't assume that he is being irrational on that basis alone.

I don't see any rational interest in keeping bidding at every single point of the game. Not beyond some small amount which the person decides upon in advance as a limit. I think, by your reasoning, that a person having lost a dollar on a lottery ticket would be considered rational to proceed to lose everything he/she possesses trying to win.

How would they determine that limit? This question needs answering.

As to the lottery scenario, it is not at all equivalent because the expected utility of the first ticket is negative, due to the odds of winning being so small.

[SoAMadDeathWish]

Imprisoned in her/it's own presumptions about how any human behaves, be they rational, or, not.

Try selling that game to a ten year old kid from NY City, he will wind up owning you.

Or, you could use it to create an auction website and rake in $28.3 million:

http://en.wikipedia.org/wiki/Swoopo

[Selene]

Imprisoned in her/it's own presumptions about how any human behaves, be they rational, or, not.

Try selling that game to a ten year old kid from NY City, he will wind up owning you.

Or, you could use it to create an auction website and rake in $28.3 million:

http://en.wikipedia.org/wiki/Swoopo

No kidding. I have a client who is quite successful in that field.

A number of web business use the auction concepts - heck I just bought my first item on EBay ever and it was an auction.

So what is your point?

[SoAMadDeathWish]

No kidding. I have a client who is quite successful in that field.

A number of web business use the auction concepts - heck I just bought my first item on EBay ever and it was an auction.

So what is your point?

It works, contrary to your view that Alice and Bob are not realistic.

[Selene]

No kidding. I have a client who is quite successful in that field.

A number of web business use the auction concepts - heck I just bought my first item on EBay ever and it was an auction.

So what is your point?

It works, contrary to your view that Alice and Bob are not realistic.

Your Bob and Alice are not realistic in the example you use to underpin your exposition on this thread.

I believe both Ellen and Deanna critiqued your position and even I am smart enough to not go up against that alliance.

It would also be nice if you had a sense of humor...you know, like a real persom might?

A...

Post Script:

Out of curiosity, what state do you live in, or, are you outside the US?

[SoAMadDeathWish]

Your Bob and Alice are not realistic in the example you use to underpin your exposition on this thread.

I believe both Ellen and Deanna critiqued your position and even I am smart enough to not go up against that alliance.

It would also be nice if you had a sense of humor...you know, like a real persom might?

A...

Post Script:

Out of curiosity, what state do you live in, or, are you outside the US?

Really? They're not realistic? Even though they act just like a whole lot of real people do? Huh...

It doesn't matter who critiques my position, I'm still right until proven otherwise.

PS: It's the place right under my avatar.

[Selene]

PS: It's the place right under my avatar.

Thanks. My bad...I should have noticed that.

[anthony]

"Reason" got snuck in in place of "logic"

"Rational self-interest", in place of range of the moment avarice

"Fraud"is promising something for money you don't deliver.

Premises all bs, the outcome is too.

[Selene]

"Reason" got snuck in in place of "logic"

"Rational self-interest", in place of range of the moment avarice

"Fraud"is promising something for money you don't deliver.

Premises all bs, the outcome is too.

Sanity from the Cape of Good Hope!

[moralist]

I started this habit reading Ayn Rand when I read the word "epistemology" for the first time and I was so delighted when I looked it up and found out what it meant. I found a home.

Very nicely stated.

James Joyce was wrong on that because Ayn showed me that same home and I can live in it each and every day that I conscously choose too.

Thanks

A...

Ayn showed me how to build a home.

Greg

[Selene]

I started this habit reading Ayn Rand when I read the word "epistemology" for the first time and I was so delighted when I looked it up and found out what it meant. I found a home.

Very nicely stated.

James Joyce was wrong on that because Ayn showed me that same home and I can live in it each and every day that I conscously choose too.

Thanks

A...

Ayn showed me how to build a home.

Greg

And a rational mind so you could find it at the end of the day...

[moralist]

They were not trying to get something for nothing, though. They were trying to get something they valued more ($20)

That $20 is intrinsic value... not perceived value.

for something they valued less (some smaller amount of money).

The smaller value is also intrinsic value... not perceived value.

That is the classic definition of trying to get something for nothing. Zero sum games only appeal to failures who don't produce anything of useful value.

Greg

[moralist]

I started this habit reading Ayn Rand when I read the word "epistemology" for the first time and I was so delighted when I looked it up and found out what it meant. I found a home.

Very nicely stated.

James Joyce was wrong on that because Ayn showed me that same home and I can live in it each and every day that I conscously choose too.

Thanks

A...

Ayn showed me how to build a home.

Greg

And a rational mind so you could find it at the end of the day...

...most days.

[SoAMadDeathWish]

They were not trying to get something for nothing, though. They were trying to get something they valued more ($20)

That $20 is intrinsic value... not perceived value.

for something they valued less (some smaller amount of money).

The smaller value is also intrinsic value... not perceived value.

That is the classic definition of trying to get something for nothing. Zero sum games only appeal to failures who don't produce anything of useful value.

Greg

There is no such thing as intrinsic value. If things were intrinsically valuable, then wealth could never be produced by trade, as all trades would result in a mere re-allocation of value.

PS: The auction is definitely not a zero-sum game. Look up the definition of the term before you use it.

[SoAMadDeathWish]

I'm gonna re-state my position here for the sake of clarity and because I'm not gonna be able to post much later today.

1) Do not bother looking for ways to "game the system". In non-cooperative game theory, the situation is regarded as an unsolved paradox. You can only win by being irrational.

2) This brings me to my main point. Carl has set up a situation whereby Alice and Bob can only get a desirable outcome by acting against their better judgment. The way I see it, this is not fundamentally different from Carl holding them both up at gunpoint and demanding their money.

3) I don't know whether or not this is a kind of fraud. By the standard definition, it doesn't seem to be, but extending the definition in the way that Darrell suggests seems reasonable.

4) Regardless, I think that creating a situation where using your reason gets you into trouble is the pattern underlying force, fraud, and this third possibility.