From: ichudov@algebra.com (Igor Chudov @ home)
Date: Thu, 12 Dec 1996 14:04:16 -0800 (PST)
To: EALLENSMITH@ocelot.Rutgers.EDU (E. Allen Smith)
Subject: Re: Redlining
In-Reply-To: <01ICXGBPMPJ4AEL7YC@mbcl.rutgers.edu>
Message-ID: <199612122159.PAA11494@manifold.algebra.com>
MIME-Version: 1.0
Content-Type: text


E. Allen Smith wrote:
> 
> From:	IN%"ichudov@algebra.com" 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.