Decision theory and stochastic growth
By: Robson, Arthur Samuelson, Larry and Steiner, Jakub
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Material type: 
BookPublisher: The American Economic Review: Insights Description: 5(3), Sep, 2023: p.357-376.
In:
The American Economic Review: InsightsSummary: This paper examines connections between stochastic growth and decision problems. We use tools from the theory of large deviations to show that wishful thinking decision problems are equivalent to utility maximization problems, both of which are equivalent to growth maximization under idiosyncratic risk. Rational inattention problems are equivalent to growth-optimal portfolio problems, both of which are equivalent to growth maximization under aggregate risk. Stochastic growth generates extreme inequality, with nearly all wealth eventually held by those who happen to have faced empirical distributions that match the solution to the wishful thinking or rational inattention problem.- Reproduced
https://www.aeaweb.org/articles?id=10.1257/aeri.20220456
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 5(3), Sep, 2023: p.357-376 | Available | AR131081 |
This paper examines connections between stochastic growth and decision problems. We use tools from the theory of large deviations to show that wishful thinking decision problems are equivalent to utility maximization problems, both of which are equivalent to growth maximization under idiosyncratic risk. Rational inattention problems are equivalent to growth-optimal portfolio problems, both of which are equivalent to growth maximization under aggregate risk. Stochastic growth generates extreme inequality, with nearly all wealth eventually held by those who happen to have faced empirical distributions that match the solution to the wishful thinking or rational inattention problem.- Reproduced
https://www.aeaweb.org/articles?id=10.1257/aeri.20220456
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