posted
The paper you linked suggests that the utility function be adapted by effectively scaling the probabilities involved depending on the outcome attached.
Such as multiplying riskier probabilities by a scaling factor, as I pointed out earlier completely resolves all problems you have brought up, and is routinely demonstrated as an effective solution in undergraduate economics classes. Plus being incorporated into numerous economics models.
Economists aren't quite as clueless as all that .
Also, you would be well advised that economists are very different from people who philosophize about things economists use to practical effect. Portfolio theory is littered with models of risk aversion.
As for
quote:Also, I think a lot of people are "risk averse" in pursuing personal enjoyment: they stick with a lazy, proven activity (like watching TV) and avoid a night out that will probably be really fun but might go sour. A lot of laziness seems to me to be related to risk-aversion.
I think you'll find that is more easily modeled by giving those people a greater utility for staying home, with essentially no practical difference in the outcomes. Again, all the theories are wrong, but many are useful.
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