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Very interesting thought experiment!

One place where it might fall down is that our disutility for causing deaths is probably not linear in the number of deaths, just as our utility for money flattens out as the amount gets large. In fact, I could imagine that its value is connected to our ability to intuitively grasp the numbers involved. The disutility might flatten out really quickly so that the disutility of causing the death of 3^^^^3 people, while large, is still small enough that the small probabilities from the induction are not overwhelmed by it.