How not to lose a small fortune

“Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniences, and amusements of human life.” - Adam Smith, 1776 

“Money begets money.” - Benjamin Franklin, 1748

Wealth is power. Wealth enables happiness. Squandering wealth diminishes power and happiness by reducing the ability to navigate future necessities and contingencies. Indulging current wants at the expense of our future selves deprives us of the power to live comfortably or with less pain and suffering. Wealth is a moral value and a moral outcome: It helps us endure personal and economic setbacks and empowers us to thrive. We all know that we should spend less and save more, but we just don’t. If you realize the magnitude of the loss to your future self and livelihood whenever you spend money rather than save it, then you are psychologically able to feel its loss more. Feeling loss more is sometimes good for us because it makes us avoid it. I want to use this to motivate spending less and investing more for the sake of our future prospects.

Money is a means to wealth. In every decision involving what to do with our money we should consider what we risk losing when we use it, not just what we can gain by it. Spending money or saving money is a hard choice; we want to use our money and have it too. Why save for a nebulous future good what I can spend on tangible present good? Answer: You really have more to lose than you have to gain if you do not invest more of your money, much more, than most people already do.

                 

In “The Framing of Decisions and the Psychology of Choice” (1981) Tversky and Kahneman found that people experience the pain of a loss with much greater intensity than the pleasure from a gain and that this disproportionally affects decision-making. When choosing actions leading to comparable outcomes where there is the risk of loss and an opportunity for gain, people prefer avoiding losses to acquiring gains even when the likelihood of gain outweighs the likelihood of loss. Loss aversion corrupts the perceived value of our assets and our estimates of potential gains from holding such assets. However, since we care more about losses than gains, maybe we can use our loss aversion when framing decisions about how to use our wealth, i.e., money, when we consider prospects for short-term vs. long-term gain and loss. Let’s exploit loss aversion to our advantage. Instead of asking, “Would you rather spend $5000 this year or spend $10,000 ten years from now?” ask “Would you rather lose $5000 now or $10,000 ten years from now?”

Consuming less, expending less of your resources enables your money to earn money. Money grows when you invest it. Compounding interest and re-investing dividends on investments, e.g., shares of an S&P 500 index fundwork like magic but it is just math. Returns on investments are risky, where risk is the probability that an investment's actual return will be different than expected. Statistical data on U.S. stock market activity provide us information we can use to our benefit when deciding how much to spend or invest given past market returns. Here is a rough inductive argument framing the choice of comparable outcomes we face that should trigger our aversion to loss.

1. The average annual return for the U.S. stock market since 1928 is 7%.
2. Assume I can invest X dollars at 7% interest compounded annually in the U.S. stock market.
3. At this interest rate, whatever I invest this year probably doubles in value ten years from now.
4. For example, either I spend $5000 this year on things I don’t need, or I invest $5000 in a market that on average yields a 7% annual return.
5. If I spend rather than invest $5000 this year, then I lose $10,000 ten years from now.
6. If I invest rather than spend $5000 this year, then I gain $10,000 ten years from now.
7. So, I either lose $10,000 ten years from now or I gain $10,000 ten years from now.

If framing the choice this way doesn’t motivate you to spend less and invest more, consider how the future loss becomes tremendous when we extend the investment time-frame and make additional, equivalent investments for ten years (or more). Would you rather lose $70,000 every year starting ten years from now or lose $5000 per year now for ten years? Extending the time horizon to twenty years is better than ten, in that period the value of your investment/savings become much larger. Investing $5000 per year for twenty years grows to over $200,000. Can you afford to lose over $200,000? I sure can't. Run the numbers with an online compound interest calculator, show yourself what you risk losing.

Don’t confuse wants with needs. We lose too much by overpaying for our present self-indulgences. Routine expenses such as bottled water, boutique coffee, fancy new smartphones with unlimited data plans, useless vitamins and herbal supplements, credit card debt, crippling auto or home payments, $25,000 weddings and private colleges are money-sucks. Instead of buying lunch at the food court, pack a PBJ.

Investing only $5000 per year as I suggest in the example above is not going to yield enough for those of us who are neither earning six-figures nor inheriting a small fortune. If you want to fund your kid's college education or live well in retirement on, say the median average income, then you must invest at least two to three times that amount annually. Most Americans are not saving enough. Further, recessions, job loss, divorce, medical emergencies happen, each erodes our future ability to meet our obligations. You need to become a millionaire, so you will have to invest 15 to 20% of your income. I'll produce an argument for that proposition later.


Scott Merlino, PhD
Department of Philosophy
Sacramento State

A perhaps not entirely silly argument for the existence of God

I’m fascinated with an ancient argument for the existence of God which, on the surface, seems downright silly. And perhaps it is silly- but it brings up some interesting issues. The argument is attributed to Zeno of Citium, a Stoic philosopher. Here is Zeno’s argument:

1. It is reasonable to honor the gods.
2. If the gods do not exist, it is not reasonable to honor them.
3. Therefore, the gods exist.

Let’s tinker with the argument a bit, adjusting premise (1) to explicitly refer to a particular theistic religious practice- in this case, prayer. From this let us try to infer, not the existence of the gods, but of God:

1a. It is reasonable to pray (i.e. to God).
2a. If God is not real, then it is not reasonable to pray.
3a. Therefore, God is real.

An objection is possible here, which is that if an argument of this form works as well to establish the existence of the Greek gods as it does to establish the existence of the God of Abraham, it hardly makes a compelling case for western monotheism. I concede the objection. But let’s press on and see what else we can discover about this argument.

A critic will be likely to attack premise (1a) of the revised Stoic argument. It is not reasonable to pray. But why? Prayer, she may say, is not reasonable because God does not exist. When one prays, one is talking to a nonexistent being, and it is not reasonable to talk to nonexistent beings.

I used to work in downtown San Francisco. Every evening, a man would walk by who was shouting angrily at some invisible person. I assumed that he was not shouting at a real person, and so I took him to be a lunatic— that is, unreasonable. Many would say that prayer is like that.

But this initial objection begs the question. The critic cannot rebut an argument for the existence of God by assuming that God does not exist. And here is an interesting question: Are there any grounds for assessing the reasonableness of a theistic religious practice, such as prayer, without making any assumptions regarding the existence of the being to whom these practices are directed?

Our critic may say that there are not. She may press her case, saying “I will not accept the claim that it is reasonable to pray until I have some reason to believe that God exists.” She may insist that the rationality of religious practice depends on first establishing the existence of God; it is really the Stoic argument that begs the question, because the truth of premise (1a) assumes that God is real. But if that is true, then establishing the truth of (1a) essentially established the truth of the conclusion of this argument. So what is silly about the argument is that it is trivial.

These two issues appear to be inseparable from one another:

A. Is theistic religious practice reasonable?
B. Is it reasonable to believe in God?

This becomes particularly apparent if it turns out that belief in God is a religious practice- or that, generally speaking, belief in God is to be identified with religious practice generally. But I lack the space here to do justice to these suggestions.

There are two reasons why we should not try to establish the reasonableness of religious practice by first showing that God exists.

First, we would have to adopt some method in demonstrating the existence of God. Whatever method we choose will itself be part of some practice. If our method is taken from theistic religious practice- shall we look to scripture to see whether God exists?- we beg the question, since that practice assumes the reality of God. But if our method comes from some other practice, it is not likely to support belief in God. It is futile, for example, to attempt to appeal to the scientific method to demonstrate the existence of God, since the scientific method trades in physical objects, and God is not a physical object.

Second: The case of the physical sciences makes clear just how deeply practice and ontology are related, for, I would argue, a practice brings with it its own ontology- its own scheme regarding what exists. And that ontology is at home only within that particular practice. I think the relation of (A) and (B) above is analogous to the relation of (C) and (D):

C. Is the practice of physical science reasonable?
D. Is it reasonable to believe in physical objects?

If I am right about this, then the following argument is analogous to the Stoic one:

1b. The practice of physical science is reasonable.
2b. If physical objects are not real, then the practice of physical science is not reasonable.
3b. Therefore, physical objects are real.

Few philosophers would insist that the reality of physical objects be established before supposing that physical science is a rational enterprise. (Is there a double standard at work here?) This is a good thing, since, as any survivor of Introduction to Philosophy can attest, it is far from clear how we can meet this challenge.

Unless, of course, I have just done it. I think this argument for the reality of physical objects is a good one. And while I will stop short of endorsing the Stoic argument, I confess that it strikes me as obvious that one who prays is not at all like the shouting lunatic who roamed the streets of San Francisco. Perhaps the Stoic argument is not completely silly after all.

I think this discussion gestures in the direction of an important insight. We often suppose that assertions of the form, “x exists,” are univocal. But the reality of a thing is inseparable from what we have been calling a practice. What is it for God to be real, anyway? Perhaps the reality of God is just whatever is required for God to be a proper object of religious practice.

David Corner
Department of Philosophy
Sacramento State

What's the point of a point?

I don’t know whether it is more shocking to common sense to be told there are zero-dimensional mathematical points or to be told water is mostly oxygen. Both illustrate how common sense often has to take a back seat when it conflicts with progress.

My point in this entry is to argue for the existence of points, a controversial topic in metaphysics. To put the argument very simplistically, if we can agree that geometry and calculus tell us what exists, then a straightforward examination of these theories reveals that they imply:

• There exists a midpoint of any line segment.
• For each real number x, there exists a point on the mathematical line that is a distance x from the origin. 

If these two statements are true, then points exist. How do we know the two statements are true? The answer is rather complicated. Part of the answer is to show that the statements are not like the statement that there exist horns on unicorns.

Someone might ask, “Given what we know about points how do we go about detecting them?” My response is, ”Given what we know about points, we should not be trying to detect them.”

Mathematicians justify their statements by proving them, by deducing them from the axioms, but this remark de-emphasizes the fact that the axioms themselves need justification. What axiomatization does is systematize claims, not justify them.

When it comes to justifying the ascription of “truth” to mathematical existence claims, we should consider mathematics to be part of science, not a parallel discipline to science. All true mathematical claims should be justified the same way other scientific claims are—by their empirical success, by how they fit into a larger network of claims that is also justified by its success. But mathematics is a very special part of science since its claims, and those of formal logic, are much less impacted by new empirical evidence.

Mathematics demonstrates its empirical success because very often when the principles of mathematics are violated in our scientific reasoning the probability soars that the bridges we design will fall down and that absurdities will be deduced.

Let’s turn now from mathematical points to physical points, points of space, of time and of spacetime. Our well accepted physical theories imply that

• The path that Achilles takes from this point to that point has a midpoint. 
• There is an instant, a point of time, when that uranium nucleus emitted a neutron.

If these statements are true, then non-mathematical points exist. There are no good reasons to say these are mere approximations to the way things are. There are many approximations in science—a molecule is approximately a point particle—but points themselves do not lose their ontological standing simply because molecules are not really point particles.

Nor is there an unsolvable problem of epistemic access to points, of how we know about points. We made up the theory of the points, and that’s how we know about them.

We justify points holistically by appealing to how they contribute to scientific success, that is, to how the points give our science extra power to explain, describe, predict, and enrich our understanding. But we also need confidence that our science would lose too many of these virtues without the points.

We should reject the various versions of skepticism about points, such as 

(a) conventionalism; according to which there may be other undiscovered and equally adequate mathematical systems that make no use of points;

(b) semantic instrumentalism, according to which theoretical terms such as “point” are not to be interpreted as referring to anything,  

(c) theoretical reductionism, according to which the term “point” is a disguised way of referring to observable phenomena, 

(d) constructive empiricism, according to which points may exist, but we are only justified in accepting scientific theories that refer to unobservable entities as "empirically adequate."

By contrast, we should embrace this quotation from Putnam: “The positive argument for realism is that it is the only philosophy that doesn't make the success of science a miracle.”

Let’s bet on this success. Let’s bet that the truth of point talk and the other talk with theoretical terms is integral to explaining science’s success at making predictions and producing explanations. And bet that the existence of points comes along with the truth of point talk. Point talk is not an idle or extraneous part of science, although we should agree with Kitcher that no “sensible realist should ever want to assert that the idle parts of an individual practice, past or present, are justified by the success of the whole.” We should not insist, though, that the successful reference of “point” is a necessary condition for the success of theories that incorporate the word “point.” And even though some theoretical terms of our best contemporary science will be regarded as non-referring by future generations of scientists, there is no good reason to bet that the term “point” will be one of those terms.

One last comment on the holism involved in justification. We are justified in adding points into our ontology because they are indispensable to the rest of the package that we have good reason to accept as approximately true. This package is large. In contains the lack of sufficient reasons to doubt that motion is continuous rather than discrete, the need in so many places to use the principles of geometry, calculus and logic, the need to embrace the general theory of relativity which describes the details of all motion in a background spacetime composed of points that are indiscernible one from another, the belief that quantum mechanics is approximately true and that space and time are not quantized in quantum mechanics, the recognition that the sciences have made so many varied, successful predictions, the presumption of the overall instrumental success of scientific methods across the history of science, and the assumption that we are not dreaming.

That is the point of a point.

Brad Dowden

Department of Philosophy

Sacramento State

Holes as natural kinds

Metaphysical questions can sound profound and stupid at the same time.*  That’s why it’s difficult to know whether a sense of humor (or at least of irony) is a useful trait for a metaphysician, or a hindrance. David Lewis, a metaphysician of the first rank with a highly developed sense of both, once authored a witty little essay on holes.

Where else but in metaphysics could you get a sustained argument about holes?

Lewis was a physicalist and a nominalist, and holes constitute an obvious problem for someone who believes that only concrete material objects exist. After all, holes are not made of matter. Yet holes have many of the other properties of material objects: size, shape, location, as well as causal powers. Thus there is a strong case for their reality, as Lewis concluded, despite the not-being-made-of-matter thing.

Since I view the prospect of non-material things with equanimity, I’m perfectly happy with a world full of holes.

My only question concerns their nature.

My answer: Holes strongly nomologically supervene on matter.

A’s supervene on B’s if the presence of A’s is rendered possible only by the presence of B’s. There can be holes only if they are holes in something.

The supervenience relation is nomological because it depends on physical law. Only in worlds in which the physical laws allow matter to form aggregations, to ‘clump’, can there be masses of matter capable of having holes in them.

The supervenience is strong: in all such physically similar worlds matter will be hole-capable.

Holes are not guaranteed even in such worlds, though: in a world whose physical law permits matter but where for some reason the possibility is not realized, or in a world where matter fills every point of space, holes will be absent.

But barring such possibilities, if certain conditions are met, the presence of matter will necessitate the presence of holes. Any aggregation of matter that is not completely homogeneous either in its surface topology or in the volume it occupies will have holes in it. A solid perfect cube or sphere has no holes. Dice and golf balls, however, have holes. Indeed golf balls are covered with them. A tennis ball, not being solid, has a great big hole in the center. It’s mostly hole, actually, by volume.

Why should we accept the reality of holes? Couldn’t a physicalist just say instead that reference to nothings like holes is absurd. Just make reference to the something, without countenancing holes at all.

There are two problems with such a reductionist program; the problems are connected.

Problem 1: Causal Powers

I once opened a pint of Ben & Jerry’s. (Actually I have done that more than once, but this particular episode was especially memorable.) I was wondering why it felt a bit light. Scooping into it I discovered a big bubble. That caused it to have the weight it did. It also caused me to be Quite Put Out.

Golf balls have dimples on them because they cause the air just above the surface to rotate with the ball. As a result the smoother air is pulled a bit more into the ball’s wake, reducing drag. (You may recognize Aristotle’s explanation of projectile motion here.) The dimples also lower the air pressure on the top of the ball, producing lift much like an airplane’s wing. A smooth golf ball would travel only about half as far as one with dimples. (Scientific American, September 2005)

To the extent that holes have causal powers, they must be countenanced in any account of What Goes On.

Problem 2: Explanations

But we are forced to attribute causal powers to holes only if we are forced to make reference to them in our explanations.

Wouldn’t it be better to explain things by appeal only to the properties and powers of somethings?

In this case the properties would presumably be shape properties of masses of matter. So don’t explain my disappointing pint of Ben & Jerry’s by saying that “it had a bubble yay big in it” (for some value of yay). Instead give a description of the shape of the mass. Don’t mention ‘voids’, ‘absences’, ‘discontinuities’ either. If you’re going to cheat, cheat smart.

A mass of ice cream with two smaller bubbles with volumes equaling the single bubble in mine would be equally disappointing. Describe the differences in the two shapes of the ice cream yielding this same result. Then describe all possible shapes that would yield the same result. Grasping that many shape properties is beyond human cognitive powers.

But counting bubbles isn’t.

Try to give the explanation of why dimpled golf balls fly farther than smooth ones without mentioning the dimples. Such an explanation will appeal only to the shape of surface. How many possible shapes of surfaces would produce the same result? How could we grasp all those shapes? Several companies have experimented with hexagonal dimples instead of round ones. Describe the difference in the surface of a golf ball with hexagonal dimples instead of round ones without mentioning the dimples or their shape.

It would seem then, that holes function in explanations as natural kinds.

But if an entity is a natural kind possessing causal powers, it has an excellent claim to be real.

This admittedly rather silly example strikes me as instructive for physicalist programs of reduction.

Since the supervenience relation that brings holes into existence is ‘physicalistically kosher’, if you’re going to compile a complete list of the physical objects in the world you’re going to have to count the holes.

Do golf balls have their dimples as parts then?

Of course not. They’re supervenient objects, not constituent objects.

What would be a reasonable motive for avoiding this conclusion?

 *This post is dedicated to my students in PHIL 181: Metaphysics this semester, who put up with a lot.

Thomas Pyne
Department of Philosophy
Sacramento State