Schelling Fences versus Marginal Thinking

by Davidmanheim2 min read22nd May 20198 comments



Follow-up / Related to: Scott Alexander's Schelling Fences on Slippery Slopes, Sunk Cost Fallacy, Gwern's Are Sunk Costs Fallacies?, and Unenumerated's Proxy Measures, Sunk Costs, and Chesterton's Fence

I was recently reading an essay by Clayton Christensen, in the (fairly worthwhile) HBR's "Must Reads" boxed set, where he recommends that people "Avoid the Marginal Cost Mistake". In short, he suggests that Schelling Fences are sometimes ignored, or not constructed, because of a somewhat fallacious application of marginal-cost thinking. For example, my Schelling fence for work is that I stop when it is time to get my kids. The other side is that occasionally I'm in the middle of something - coding, or writing this lesswrong post - where being interrupted is fairly high cost. I can usually ask someone else to pick them up instead, and given how much I see them, the marginal value of time with my kids is low.

Christensen suggests that this analysis is incorrect, largely because of myopia. I am ignoring the longer term benefits of family dinners because the connection between coming home today and building the norm of being home for dinner every night is a longer-term investment. The future is full of extenuating circumstances, and only a fairly strong Schelling fence will let me insist that my kids stay home for dinner once they are teenagers.

I'd apply it more broadly, but his point was that this is especially critical in matters of morality. Cheating once changes everything. The simple fact that you cheated weakens your resolve not to in the future. The spiral created by a single action leads easily down a path towards using infinite money and invulnerability cheat codes, with no further challenge or enjoyment from playing the video game - or in the context he's discussing, it led to jail time for two of the people from his graduating class back in college.


The critical question is: where do we want to use marginal cost analysis, and where do we want to stick to our sunk-costs and Schelling fences?

Based on Christensen's analysis, I would suggest that Schelling fences rather than sunk costs are particularly valuable for reinforcing values that are hard to measure, are too long term to get routine feedback on, or that involve specific commitments to other people. On the other hand, based on Gwern's work, I think there are places where marginal costs are under-appreciated, especially in relation to other people. Below, I lay out some settings and examples on each side.

Some examples of where to consider reinforcing fences and avoiding simplistic marginal cost thinking might include:

  • Going to a weekly meet-up that reinforces your connections to a good epistemic community and/or effective altruist values. Value drift is a long-term concern that needs short term reinforcement.
  • Anything involving family or long-term relationships. Marginal cost thinking is poisonous for relationships, since the benefits of investing in the relationship are not very visible, and long term.
  • Moral rules. Utilitarian and consequentialist thinking is easy to use to make yourself stupider. At the very least, you should be asking others - just like this is useful to avoid unilateralist curses, it is useful to avoid self-deception and convenient excuses.
  • Where there are switching costs or longer term goals. Learning to play guitar instead of continuing to practice piano (or moving from C++ to Python) is easy to justify in the short term, but expensive in terms of changes needed and resetting progress.
  • When goals are unknown. As Unenumerated put it, "cases where substantial evidence or shared preferences that motivated the original investment decision have been forgotten or have not been communicated, or otherwise where the quality of evidence that led to that decision may outweigh the quality of evidence that is motivating one to change one's mind."

Some examples of where it seems useful to avoid constructing Schelling fences, and to try paying more attention to marginal cost:

  • When constructing rules for other people, or in orgnaizations. Schelling fences are useful for self-commitment, otherwise they are rules and formal structures rather than norm-based fences. As gwern noted, " Whatever pressures and feedback loops cause sunk cost fallacy in organizations may be completely different from the causes in individuals."
  • When the environment is very volatile, and non-terminal goals change. It's easy to get stuck in a mode where the justification is "this is what I do," rather than a re-commitment to the longer term goal. If you are unsure, try revisiting why the fence was put there. (But if you don't know, be careful of removing Chesterton's Fence! See "When goals are unknown", above.)
  • When the fence is based on a measurable output, rather than an input. In such a case, the goal has been reified, and is subject to Goodhart effects. Schelling fences are not appropriate for outcomes, since the outcome isn't controlled directly. (Bounds on outcomes also implicitly discourage further investment - see: Shorrock's Law of Limits. If necessary, the outcome itself should be rewarded, rather than fenced in.)