DMU=Risk Aversion
DMU=Risk Aversion U I
"Risk Aversion"=DMU(I)=Risk Aversion in Income One might be risk averse in income,risk preferring in length of life
“Risk Aversion”=DMU(I)=Risk Aversion in Income •One might be risk averse in income, risk preferring in length of life
If You Find This Stuff Really Interesting Chapter 13 of my Price Theory is Webbed
If You Find This Stuff Really Interesting • Chapter 13 of my Price Theory is Webbed
DMU and Income Redistribution If marginal utility of income is lower the higher one's income A transfer from rich to poor raises total utility Which,for a utilitarian,is an argument for income redistribution ●But
DMU and Income Redistribution •If marginal utility of income is lower the higher one’s income • A transfer from rich to poor raises total utility • Which, for a utilitarian, is an argument for income redistribution • But …
Two Problems With that Argument The argument for DMU does not apply that the marginal utility of the rich man is lower than the poor man because they are different people and might have different utility functions Redistribution is not costless
Two Problems With that Argument • The argument for DMU does not apply that the marginal utility of the rich man is lower than the poor man because they are different people and might have different utility functions • Redistribution is not costless