Ability to pay and betting as a sign of belief

Noah Smith points out that bets reveal belief less than portfolios do.

There is another factor he has neglected: Given I am an honest bettor, I want to be able to pay, should I lose, without starving to death or declaring bankruptcy.

Say I am a modestly endowed person, supporting a family, and someone offers me a one-to-a-billion bet that when I wake up tomorrow, all of my internal organs will be on the opposite side of my body from where they are now, but I will still be alive.

I think the odds of this happening are less than one-in-a-billion. If I win I get (say) a dollar, but if I lose I am ruined. And bringing in the possibility of bankruptcy only makes things worse for those who want to assert that our willingness to bet reflects our true beliefs: if I am not going to pay anyway, but declare bankruptcy instead, then I can make any old bet I that tickles my fancy: "Yes, I'll give you a googleplex-to-one odds in your favor, no problem."


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