Suppose that you prefer A to B, B to C, and C to A. Your preferences violate Expected Utility Theory by being cyclic. Money-pump arguments offer a way to show that such violations are irrational. Suppose that you start with A. Then you should be willing to trade A for C and then C for B. But then, once you have B, you are offered a trade back to A for a small cost. Since you prefer A to (...) B, you pay the small sum to trade from B to A. But now you have been turned into a money pump. You are back to the alternative you started with but with less money. This Element shows how each of the axioms of Expected Utility Theory can be defended by money-pump arguments of this kind. The Element also defends money-pump arguments from the standard objections to this kind of approach. This title is also available as Open Access on Cambridge Core. (shrink)

One might think that money pumps directed at agents with cyclic preferences can be avoided by foresight. This view was challenged two decades ago by the discovery of a money pump with foresight, which works against agents who use backward induction. But backward induction implausibly assumes that the agent would act rationally and retain her trust in her future rationality even at choice nodes that could only be reached if she were to act irrationally. This worry does (...) not apply to BI-terminating decision problems, where at each choice node backward induction prescribes a move that terminates further action. For BI-terminating decision problems, it is enough to assume that rationality and trust in rationality are retained at choice nodes reachable by rational moves. The old money pump with foresight was not BI-terminating. In this paper, we present a new money pump with foresight, one that is both BI-terminating and considerably simpler. (shrink)

The idea that rational agents should have acyclic preferences and should obey conditionalization has been defended on the grounds that otherwise an agent is threatened with becoming a “money pump.” This essay argues that such arguments fail to prove their claims.

The Money Pump argument is designed to demonstrate the irrational flaw of having cyclic preferences, by showing how the irrational agent is vulnerable to exploitation. The argument faces some longstanding objections, which point out how one may avoid the threat of exploitation without resolving the associated irrationality. Recently a new, synchronic version of Money Pump has been put forward which promises to undercut those standard objections. However, I argue that the synchronic Money Pump cannot (...) deliver on its promise: parallel objections can be reconstructed for this version, too, demonstrating that it ultimately does not improve on the original. (shrink)

In “The Irrelevance of the Diachronic Money-Pump Argument for Acyclicity,” The Journal of Philosophy CX, 8 (August 2013), 460-464, Johan E. Gustafsson contends that if Davidson, McKinsey and Suppes’ diachronic money-pump argument in their "Outlines of a Formal Theory of Value, I," Philosophy of Science 22 (1955), 140-160 is valid, so is the synchronic argument Gustafsson himself offers. He concludes that the latter renders irrelevant diachronic choice considerations in general, and the two best-known diachronic solutions to (...) the money pump problem in particular. I argue here that this reasoning is incorrect, and that Gustafsson’s synchronic argument is faulty on independent grounds. Specifically, it is based on a false analogy between the derivation of a synchronic ordinal ranking from a transitive series of pairwise comparisons, and the putative derivation of such a ranking from an intransitive series. The latter is not possible under the assumption of revealed preference theory, and is highly improbable even if that assumption is rejected. Moreover, Gustafsson’s argument raises issues of fidelity to the historical texts that must be addressed. I conclude that the money pump, and cyclical choice more generally, are necessarily diachronic; and therefore that the two best-known diachronic solutions to the money pump problem remain relevant. (shrink)

The idea that rational agents should have acyclic preferences and should obey conditionalization has been defended on the grounds that otherwise an agent is threatened with becoming a “money pump.” This essay argues that such arguments fail to prove their claims.

I describe in section 1 how cyclical preferences can arise. In section 2, I relate preference to judgments of choiceworthiness and distinguish between two kinds of preference cycles, vicious and benign. In section 3, I run through the standard money pump in order to show, in section 4, how this pump can be stopped by foresight, using backward induction. A new money pump that *cannot* be stopped by foresight is presented in section 5. This (...) class='Hi'>pump works even for agents with benign cyclical preferences. What makes it work is persistency on the part of the would-be exploiter. In section 6, I compare this pump to a diachronic Dutch book that can be set up against someone whose probability assignments violate Reflection. Even in this case, the book only works if the bookie is assumed to be persistent. I use this comparison between preference cyclicity and violations of Reflection in order to question whether exploitability must be seen as a proof of irrationality. Finally, in section 7, I consider resolute choice as an alternative to the backward-induction procedure. While a resolute chooser cannot be exploited, I argue that resoluteness is not required by rationality. The argument is based on a suggestion that rationality, when it comes to actions, is a local rather than a global requirement. (shrink)

I describe in section 1 how cyclical preferences can arise. In section 2, I relate preference to judgments of choiceworthiness and distinguish between two kinds of preference cycles, vicious and benign. In section 3, I run through the standard money pump in order to show, in section 4, how this pump can be stopped by foresight, using backward induction. A new money pump that *cannot* be stopped by foresight is presented in section 5. This (...) class='Hi'>pump works even for agents with benign cyclical preferences. What makes it work is persistency on the part of the would-be exploiter. In section 6, I compare this pump to a diachronic Dutch book that can be set up against someone whose probability assignments violate Reflection. Even in this case, the book only works if the bookie is assumed to be persistent. I use this comparison between preference cyclicity and violations of Reflection in order to question whether exploitability must be seen as a proof of irrationality. Finally, in section 7, I consider resolute choice as an alternative to the backward-induction procedure. While a resolute chooser cannot be exploited, I argue that resoluteness is not required by rationality. The argument is based on a suggestion that rationality, when it comes to actions, is a local rather than a global requirement. (shrink)

The standard argument for the claim that rational preferences are transitive is the pragmatic money-pump argument. However, a money-pump only exploits agents with cyclic strict preferences. In order to pump agents who violate transitivity but without a cycle of strict preferences, one needs to somehow induce such a cycle. Methods for inducing cycles of strict preferences from non-cyclic violations of transitivity have been proposed in the literature, based either on offering the agent small monetary transaction (...) premiums or on multi-dimensional preferences. This paper argues that previous proposals have been flawed and presents a new approach based on the dominance principle. (shrink)

After maintaining in that certain cyclical preferences can be reasonable, the following questions were tabled: “in what circumstances and under what assumptions … these … preferences of George's would turn him into a ”money pump,” and in what circumstances and under what assumptions they would not do that.” Two pumps afford answers. George, who is sufficiently reasonable and well-informed to use backward induction, has, for this reason, nothing to fear from the first pump, but the second, of (...) a nonstandard design by Wlodek Rabinowicz, ruins him just because he is subject to the constraints of backward induction. Could he be helped by extending his options from actions in a single round, to courses of actions starting in that round? Possibly not. He would be safe if he were capable of resolute choices of couses of action. Even so, he is in trouble through no fault of his, if, as I think, not having that capacity, though a misfortune, is not a fault. (shrink)

A money-pump is a thought experiment involving a person whose preferences form a circle. Repeatedly, she pays some money to go from one alternative to another that she likes better. When she has paid her way around the full circle she is back at the starting-point, but with less money. Money-pumps have been used to show that certain preference patterns are irrational since they make a person exploitable. Formal tools can be used to analyze (...) class='Hi'>money-pumps in a precise manner, distinguish between different types of money-pumps, and investigate decision strategies to avoid their pernicious effects. Although money-pumps are rather contrived constructions, these investigations have practical relevance since there seem to be decision situations in the real world with the same structure. (shrink)

In an alleged counter-example to the completeness of rational preferences, a career as a clarinettist is compared with a career in law. It seems reasonable to neither want to judge that the law career is at least as preferred as the clarinet career nor want to judge that the clarinet career is at least as preferred as the law career. The two standard interpretations of examples of this kind are, first, that the examples show that preferences are rationally permitted to (...) be incomplete and, second, that the examples show that preferences are rationally permitted to be indeterminate. In this paper, I shall argue that the difference between these interpretations is crucial for the money-pump argument for transitivity, which is the standard argument that rational preferences are transitive. I shall argue that the money-pump argument for transitivity fails if preferences are rationally permitted to be incomplete but that it works if preferences are rationally permitted to be indeterminate and rationally required to be complete. (shrink)

So-called money pump arguments aim to show that intransitive preferences are irrational because they will lead someone to accept a series of deals that leaves his/her financially worse off and better off in no respect. A common response to these arguments is the foresight response, which counters that the agent in question may see the exploitation coming, and refuse to trade at all. To obviate this response, I offer a “deluxe money pump argument” that applies dominance (...) reasoning to a modified money pump case. (shrink)

Agents who employ non-rational choice procedures are often vulnerable to exploitation, in the sense that a profit-seeking trader can offer them a harmful transaction which they will nevertheless accept. We examine the vulnerability of a procedure for deciding whether to buy a lottery: observe another agent who already bought it and buy the lottery if that agent’s experience was positive. We show that the exploitation of such agents can be embedded in an inter-temporal market mechanism, in the form of speculative (...) trade in an asset of no intrinsic value. (JEL: D84). (shrink)

The money-pump argument figures as the staple argument in support of the view that cyclic preferences are irrational. According to a prominent way of understanding the argument, it is grounded in the assumption that it is irrational to make choices that lead one to a dispreferred alternative. My aim in this paper is to motivate diffidence with respect to understanding the money-pump argument in this way by suggesting that if it is so understood, the argument emerges (...) as question-begging and as a complicated distraction in the debate concerning cyclic preferences, and that there is a way of understanding the argument that casts it as grounded in a less controversial starting point. (shrink)

The paper's focus is on pragmatic arguments for various ‘rationality constraints’ on a decision maker’s state of mind: on his beliefs or preferences. An argument of this kind purports to show that a violator of a given constraint can be exposed to a decision problem in which he will act to his guaranteed disadvantage. Dramatically put, he can be exploited by a clever bookie who doesn’t know more than the agent himself. Examples of pragmatic arguments of this kind are synchronic (...) Dutch Books, for the standard probability axioms, diachronic Dutch Books, for the more controversial principles of reflection and conditionalization, and Money Pumps, for the transitivity requirement on preferences. The proposed exploitation set-ups share a common feature. If the violator of a given constraint is logically and mathematically competent, he can be exploited only if he is disunified in his decision-making. Exploitation is possible only if the agent makes decisions on various issues he confronts one by one, rather than on all of them together. Unity in decision making may be quite costly and is often inconvenient, especially when it concerns opportunity packages that are spread over time. Therefore, pragmatic arguments should be seen as delivering conditional conclusions: “To afford being disunified as a decision maker, you’d better satisfy these constraints.” Arguments of this kind fail to establish the inherent rationality of the constraints under consideration. Levi’s view of the status of pragmatic arguments (cf. Levi 2002) is diametrally opposed. According to him, only synchronic pragmatic arguments are valid (indeed, categorically valid). The diachronic ones, he argues, lack any validity at all. This line of reasoning is questioned in the paper. (shrink)

In response to cases that involve tiny probabilities of huge payoffs, some argue that we ought to discount small probabilities down to zero. However, this paper shows that doing so violates Independence and Continuity, and as a result of these violations, those who discount small probabilities can be exploited by money pumps. Various possible ways of avoiding exploitation will be discussed. This paper concludes that the money pump for Independence undermines the plausibility of discounting small probabilities. Much (...) of the discussion on Independence generalizes to other views that also violate Independence. (shrink)

My focus is on pragmatic arguments for various ‘rationality constraints’ on a decision maker’s state of mind: on his beliefs or preferences. An argument of this kind purports to show that a violator of a given constraint can be exposed to a decision problem in which he will act to his guaranteed disadvantage. Dramatically put, he can be exploited by a clever bookie who doesn’t know more than the agent himself. Examples of pragmatic arguments of this kind are synchronic Dutch (...) Books, for the standard probability axioms, diachronic Dutch Books, for the more controversial principles of reflection and conditionalization, and Money Pumps, for the transitivity requirement on preferences. The proposed exploitation set-ups share a common feature. If the violator of a given constraint is logically and mathematically competent, he can be exploited only if he is disunified in his decision-making. Exploitation is possible only if the agent makes decisions on various issues he confronts one by one, rather than on all of them together. Unity in decision making may be quite costly and is often inconvenient, especially when it concerns opportunity packages that are spread over time. On my view, therefore, pragmatic arguments should be seen as delivering conditional conclusions: “If you want to afford being disunified as a decision maker, then you’d better satisfy these constraints.” The arguments of this kind fail to establish the inherent rationality of the constraints under consideration. Levi’s view of the status of pragmatic arguments is opposed to mine. According to him, only synchronic pragmatic arguments are valid. The diachronic ones, he argues, lack any validity at all. This line of reasoning is questioned in my paper. (shrink)

Hare proposes a view he calls prospectism for making choices in situations in which preferences have a common, but problematic structure. I show that prospectism permits the decision-maker to make a series of choices she knows in advance will lead to a sure loss. I also argue that a theory that permits the decision-maker to make choices she knows in advance will lead to a sure loss should be rejected.

The money-pump argument is the standard argument for the acyclicity of rational preferences. The argument purports to show that agents with cyclic preferences are in some possible situations forced to act against their preference. In the usual, diachronic version of the money-pump argument, such agents accept a series of trades that leaves them worse off than before. Two stock objections are (i) that one may get the drift and refuse the trades and (ii) that one may (...) adopt a plan to only accept some of the trades. This article argues that these objections are irrelevant. If the diachronic money-pump argument is cogent, so is a more direct synchronic argument. The upshot is that the standard objections to the diachronic money-pump argument do not affect this simpler synchronic argument. Hence the standard objections to the money-pump argument for acyclicity are irrelevant. (shrink)

In this article, I examine the consequences of Mamou’s recent solution to the so-called problem of reindividuation. The problem is first proposed by John Broome as an argument against the Humean view of rationality and subjective decision theory. Essentially, Broome argues that the reindividuation of outcomes must be constrained in some way if the axioms of rationality are not to be vacuous, but the constraints on individuation cannot be consistent with the Humean view of rationality. Mamou offers an elegant Humean (...) solution to this problem. We do not need such rules for reindividuation since the subjective decision theory operates under the assumption of maximal relevance of description, and only under that assumption do the axioms tell anything. Thus the problem of reindividuation dissolves in a quite natural and simple way. However, I argue that if we connect this solution to the topic of justification for the requirements of rationality, problems arise. I examine the influence of the solution on the common argument for the axioms of decision theory, the so-called money-pump arguments. These arguments are a staple in the justification of the axioms of subjective decision theory. I argue that they are in collision with Mamou’s solution. This collision brings us to the dilemma: either accept Broome’s conclusions or lose the money-pump arguments as an effective tool for justification of the axioms. I conclude that neither of the options is really good for the defenders of the Humean view of rationality. (shrink)

It is widely held that the possibility of value-incomparability between alternatives poses a serious threat to comparativism. Some comparativists have proposed to avoid this problem by supplementing the three traditional value relations with a fourth value relation, variously identified as "roughly equal" or "on a par", which is supposed to hold between alternatives that are incomparable by the three traditional value relations. However, in a recent article in this journal, Nien-he Hsieh has proposed that the comparisons thought to require rough (...) equality or parity could instead be understood in terms of the concept of "clumpiness". Against this suggestion, Martin Peterson has argued that the concept of clumpiness allows agents to be exploited in money-pumps, and thus that there is no way of linking clumpiness to rational choice. This would remove the central appeal of the concept. In this note, I show that Peterson’s argument fails to establish that the concept of clumpiness allows agents to be exploited in money-pumps. (shrink)

This work has been selected by scholars as being culturally important and is part of the knowledge base of civilization as we know it. This work is in the public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity has a copyright on the body of the work. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and (...) made generally available to the public. To ensure a quality reading experience, this work has been proofread and republished using a format that seamlessly blends the original graphical elements with text in an easy-to-read typeface. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant. (shrink)

Whether economics warrants public trust depends on the extent to which assertions by economists can be deemed credible. Three examples from microeconomics are examined to assess how the discipline performs in this regard. First, a purely theoretical argument with broad conceptual implications: a quasi-evolutionary argument for rational choice based on the notion of money pumps. Second, a modelling-related claim with significant social implications: economists’ objection to minimum wages based on a simple supply-demand model. Third, methodological choices with implications for (...) all empirical work in microeconomics: the recent proclamation of a ‘credibility revolution’ in applied microeconomics through the use of experimental and quasi-experimental methods. These are assessed against proposed criteria for credibility: epistemic validity, epistemic reliability, and epistemic reflexivity. On the basis of the performance of the discipline against these criteria on the examples considered, I conclude that public distrust of economics and economists can be well-founded. (shrink)

Politics, Philosophy & Economics, Volume 21, Issue 4, Page 347-371, November 2022. We sometimes have to choose between options that are seemingly incomparable insofar as they seem to be neither better than, worse than, nor equal to each other. This often happens when the available options are quite different from one another. For instance, consider a choice between prioritizing either criminal justice reform or healthcare reform as a public policy goal. Even after the relevant details of the goals and possible (...) reforms are filled in, it is plausible that neither goal is better than, worse than, nor equal to the other. Such seemingly incomparable options present a problem for rational choice since it is unclear how an agent might rationally choose between them. What we need are some principles to help govern rational choice when faced with seemingly incomparable options. I here present three such principles. While each principle is individually compelling, I show that they are jointly incompatible. I then argue that the correct response to this inconsistent triad is to reject the principle that rationally censures performing a sequence of choices one knows will result in a suboptimal outcome. The upshot is that when seeming incomparability is involved, an agent can money pump themselves without being less rational for it. (shrink)

In the standard money pump, an agent with cyclical preferences can avoid exploitation if he shows foresight and solves his sequential decision problem using backward induction (BI). This way out is foreclosed in a modified money pump, which has been presented in Rabinowicz (2000). There, BI will lead the agent to behave in a self-defeating way. The present paper describes another sequential decision problem of this kind, the Centipede for an Intransitive Preferrer, which in some respects (...) is even more striking than the modified pump. In the new problem, the BI reasoning that implies self-defeating behavior does not rest on the controversial robustness assumption concerning beliefs in one's future rationality. This strengthens the claim that foresight cannot save the intransitive preferrer from a self-defeating course of action. (shrink)

The diverse historical, cultural, and physiological influences that determine sexual orientation are the focus of this fascinating work by one of the foremost investigators of human sexuality. Drawing on case studies from his sexology clinic, the author explores such topics as prenatal and postnatal history, gender differentiation in childhood, and postpubertal hormonal theories. In so doing, he addresses the many enigmas of sexual orientation: What makes some children grow up to be homosexual, while others become heterosexual or bisexual? To what (...) degree is gender identity determined before birth? How do the concepts of masculine and feminine become differentiated during childhood? What do we know about the relationship between hormones and homosexuality in adulthood? A unique feature of this book is the follow-up reporting on Money's long-term studies that began over three decades ago. The studies are brought together here for comparison with one another--and with the work of others--and their full significance is systematically evaluated. Also explored here is his pioneering concepts of lovemaps, the pathways of individual sexual and erotic development, and the factors that may shape overall healthy or pathological orientation, paraphilia, and gender transposition in childhood, adolescence, and maturity. Written in accessible language for researchers and clinicians, this authoritative work is both thought-provoking and informative as it explores timely questions of sexual orientation. (shrink)

This paper addresses a gap in knowledge concerning heterogeneity in stakeholder expectations of Corporate Responsibility. Past research concentrates onprioritising stakeholders in groups, such as groups of employees, customers, investors, suppliers, etc. It has, however, been suggested that stakeholders do not consist of homogenous groups, but differ according to individual needs and expectations. A latent class model is proposed as a method to investigate heterogeneity within stakeholder groups and to identify homogenous subpopulations within stakeholder groups who share similar expectations of Corporate (...) Responsibility. Latent Class Analysis is a relatively new method being used for segmentation purposes, applied mainly by research in Sociology and the Social Sciences. The contribution is thus twofold: to identify subgroups of stakeholders with reference to their attitudes to Corporate Responsibility and the application of a research technique not widely used in the Corporate Responsibility field before. (shrink)

This paper provides an empirical test of a model for the strategic management of stakeholders. More specifically, it provides a methodology that linksstakeholder expectations of business with the strategic expectations of managers. This is achieved by operationalising the idea of bi-directionality in stakeholder research and by applying rigorous statistical data analysis.

Reviews the diverse historical, cultural, and physiological influences that determine sexual orientation.