Risk Aversion and the Long Run Article Swipe

PDF

Related Concepts

Expected utility hypothesis Framing (construction) Framing effect Decision theory Subjective expected utility Prospect theory Utility theory Economics Disposition Von Neumann–Morgenstern utility theorem Rational choice theory (criminology) Risk aversion (psychology) Positive economics Mathematical economics Epistemology Microeconomics Psychology Social psychology Philosophy Engineering Structural engineering Persuasion Criminology

Johanna Thoma ·

YOU? · · 2018 · Open Access · · DOI: https://doi.org/10.1086/699256 · OA: W2807807825

This article argues that Lara Buchak's risk-weighted expected utility (REU) theory fails to offer a true alternative to expected utility theory. Under commonly held assumptions about dynamic choice and the framing of decision problems, rational agents are guided by their attitudes to temporally extended courses of action. If so, REU theory makes approximately the same recommendations as expected utility theory. Being more permissive about dynamic choice or framing, however, undermines the theory's claim to capturing a steady choice disposition in the face of risk. I argue that this poses a challenge to alternatives to expected utility theory more generally.