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Re: Redlining
E. Allen Smith wrote:
>
> From: IN%"[email protected]" 11-DEC-1996 19:45:12.83
>
> >A good question. It is based on the theory that every person has a
> >"utility" function in their mind. This function determines the "worth"
> >of money and worthiness of risk.
>
> >If that function as a function of income is strictly concave
>
> Except in the case of a consumer for whom the lower end is essentially
> no different than 0 - e.g., a minimum amount for survival - having a concave
> utility function for money (as opposed to less-convertible goods/services)
> is irrational. While I am in favor of allowing people to be irrational if they
> so desire, I am not in favor of governmental rules (e.g., coercive rules) being
> determined by irrationality. See my comments on emotion to Matt M.
Utility functions, are never irrational. I like tangerines and hate
apples, some other are the other way around, but it is not irrational.
Concavity of utility function of money (equivalence of risk-aversion)
for most consumers is an empirical fact.
I agree that rationality per se should not be mandated by the government
rules though.
- Igor.