Marginal utility theory for traders, from Freakonomics

Steve Levitt channels Daniel Bernoulli, in addressing utility, in an easy-to-read way:

At least for me, there are not too many questions that would lead me to respond, “For $25 million, no way, but for $50 million I’ll think about it.” Twenty-five million dollars is so much money that it’s hard to think about what you would do with it. It sure would be nice to have the first $25 million. I’m not sure what I would need the second $25 million for.

The high-turnover (read high-extinction) traders in these prediction markets most likely have not familiarized themselves with expected utility. This is why they do not follow my recommendation of risking only 4% maximum of account total on any single contract. Or maybe there are some other reasons of which I know not--please send me a comment of enlightenment!