tag:blogger.com,1999:blog-4792392242583903149.post5389256460578209446..comments2023-12-02T12:10:36.667-05:00Comments on Separating Hyperplanes: Piketty and immiseration of the capitalistsMatthew Martinhttp://www.blogger.com/profile/03395599411699593043noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-4792392242583903149.post-55562026982371906722018-03-05T20:26:48.830-05:002018-03-05T20:26:48.830-05:00I only recently found this blog, but this post was...I only recently found this blog, but this post was extremely interesting. So maybe you can help me out here: <br /><br />You said that poorer households are willing to trade a larger portion of their wealth away to insure against default. Intuitively this seems spot-on since a concave utility function guarantees declining absolute risk aversion. <br /><br />However, in trying to understand this intuition better I reviewed part of Chapter 6 of MWG. Example 6.C.1 provides a proof that any risk-averse agent will, if insurance is actuarially fair, fully insure. However, if the price of insurance is the same across households, then all households regardless of wealth will be willing to trade away the same fraction of their initial endowment. <br /><br />I'm only a first-year so I was hoping you could tell me where I go wrong here. Anonymoushttps://www.blogger.com/profile/03603797185134267934noreply@blogger.comtag:blogger.com,1999:blog-4792392242583903149.post-50457966914034501732014-05-27T20:02:27.693-04:002014-05-27T20:02:27.693-04:00Here's a simplistic model that shows similar, ...Here's a simplistic model that shows similar, and with similar assumptions. Concave utility implemented via declining marginal propensity to spend/consume out of wealth. <br /><br />Also shows the results with different levels of upward/downward redistribution or income share.<br /><br />http://www.asymptosis.com/does-upward-redistribution-cause-secular-stagnation.htmlSteve Rothhttp://asymptosis.comnoreply@blogger.com