From a personal point of view, iff my utility curve is linear (i.e. losing 50% of my wealth would have a similar magnitude of utility change as gaining 50% additional wealth) and I know my date of death, then it would make sense to invest for as long as return on capital remains below GDP growth. I would be careful about saying “most market actors use a value of δ that’s too high” because I think you can argue what they are doing is perfectly rational; if you’re not sure if you’ll reach retirement, you’ll be less inclined to contribute to a pension (from a purely selfish point of view). Now we as altruists don’t have to worry about the date of death because we are helping a pool of people into the future, who don’t have to be alive today. However, we do have to worry about utility. To achieve the return on capital, we do need to take on risk. In general, wealthier people are able to take more risks than poorer people (utility functions are more linear at higher wealth). Altruists represent these poorer people (this point is more relevant to global health and development than animal welfare and long-term future), so should be sensitive to undiversifiable risks. In other words, I don’t think it’s obvious that we should be more patient (I’m talking in general terms, not about the specifics of economic conditions right now).
You can divide δ into (1) r or real risk-free rate and (2) - ηg or (beta * MRP). My subjective view is that the risk-free rate is too low and the MRP is too high. I think very few people think about their investments in the right way: “What level of return am I willing to accept to compensate me for volatility with standard deviation of x% (typically around 20% for the stock market)?”. Most people subscribe to: “I’ll do x% equities, y% corporate bonds and z% government bonds because that’s what everybody else is doing”. I personally invest 100% in equities for this reason. Furthermore, people are not flexible in how they behave (if you are familiar with the IS-LM model, I’m basically saying IS is steeply negative). In today’s investment environment, everyone should be spending a lot more (including on charity) and saving a lot less, but that’s not how people behave in practice. This is the reason why the real risk-free rate is so negative at the moment. Either way, the consequence is that you have to ‘pay’ a lot for a risk-free rate. Typically your money will grow not too different from inflation (and currently less) if you are not prepared to take any risk.
Finally, I do think value drift and diminishing marginal returns are very important points. Value drift is major simply because the world changes so fast. And in terms of diminishing marginal returns, I think the most important thing is that what we do today impacts the future. When you deworm a child, that’s not just an “expense” for benefits in that year, it potentially improves their school performance and stimulates economic growth. I prefer to think of it as “investment”. I think it’s much more important to build out a safe framework for AI now than try doing it in 100 years’ time (even with more resources).
“In general, wealthier people are able to take more risks than poorer people (utility functions are more linear at higher wealth). Altruists represent these poorer people (this point is more relevant to global health and development than animal welfare and long-term future), so should be sensitive to undiversifiable risks. In other words, I don’t think it’s obvious that we should be more patient (I’m talking in general terms, not about the specifics of economic conditions right now).”
I think there is a mistake in here. I suppose that the utility function of altruist is even more linear than the utility function of wealthy people. This is because the return in utility units for every poor individual we (as altruists) are donating to declines really strong but there are so many poor individuals (at least yet) that the good we can do is an almost linear function of the amount of money we can spend, so altruists should be nearly risk neutral.
Despite this, I agree that it is not obvious that we should more patient.
From a personal point of view, iff my utility curve is linear (i.e. losing 50% of my wealth would have a similar magnitude of utility change as gaining 50% additional wealth) and I know my date of death, then it would make sense to invest for as long as return on capital remains below GDP growth. I would be careful about saying “most market actors use a value of δ that’s too high” because I think you can argue what they are doing is perfectly rational; if you’re not sure if you’ll reach retirement, you’ll be less inclined to contribute to a pension (from a purely selfish point of view). Now we as altruists don’t have to worry about the date of death because we are helping a pool of people into the future, who don’t have to be alive today. However, we do have to worry about utility. To achieve the return on capital, we do need to take on risk. In general, wealthier people are able to take more risks than poorer people (utility functions are more linear at higher wealth). Altruists represent these poorer people (this point is more relevant to global health and development than animal welfare and long-term future), so should be sensitive to undiversifiable risks. In other words, I don’t think it’s obvious that we should be more patient (I’m talking in general terms, not about the specifics of economic conditions right now).
You can divide δ into (1) r or real risk-free rate and (2) - ηg or (beta * MRP). My subjective view is that the risk-free rate is too low and the MRP is too high. I think very few people think about their investments in the right way: “What level of return am I willing to accept to compensate me for volatility with standard deviation of x% (typically around 20% for the stock market)?”. Most people subscribe to: “I’ll do x% equities, y% corporate bonds and z% government bonds because that’s what everybody else is doing”. I personally invest 100% in equities for this reason. Furthermore, people are not flexible in how they behave (if you are familiar with the IS-LM model, I’m basically saying IS is steeply negative). In today’s investment environment, everyone should be spending a lot more (including on charity) and saving a lot less, but that’s not how people behave in practice. This is the reason why the real risk-free rate is so negative at the moment. Either way, the consequence is that you have to ‘pay’ a lot for a risk-free rate. Typically your money will grow not too different from inflation (and currently less) if you are not prepared to take any risk.
Finally, I do think value drift and diminishing marginal returns are very important points. Value drift is major simply because the world changes so fast. And in terms of diminishing marginal returns, I think the most important thing is that what we do today impacts the future. When you deworm a child, that’s not just an “expense” for benefits in that year, it potentially improves their school performance and stimulates economic growth. I prefer to think of it as “investment”. I think it’s much more important to build out a safe framework for AI now than try doing it in 100 years’ time (even with more resources).
“In general, wealthier people are able to take more risks than poorer people (utility functions are more linear at higher wealth). Altruists represent these poorer people (this point is more relevant to global health and development than animal welfare and long-term future), so should be sensitive to undiversifiable risks. In other words, I don’t think it’s obvious that we should be more patient (I’m talking in general terms, not about the specifics of economic conditions right now).”
I think there is a mistake in here. I suppose that the utility function of altruist is even more linear than the utility function of wealthy people. This is because the return in utility units for every poor individual we (as altruists) are donating to declines really strong but there are so many poor individuals (at least yet) that the good we can do is an almost linear function of the amount of money we can spend, so altruists should be nearly risk neutral.
Despite this, I agree that it is not obvious that we should more patient.