Friday, June 17, 2011

As I watch people drive...

..I can't help but think about a problem with the Euler Equations for consumption.  Young people (especially young men) do dumb things on the road that can get themselves killed in much larger numbers than old people.   This is not just anecdotal, because insurance statistics back this up.  (Also, as one who drives in LA, my N for making this inference is pretty large).

But of course as we approach our cap T, we should be taking on more and more risks, because the expected losses get smaller and smaller.

Sure, the u(c(t),t) function can change with t, but then it also becomes sort of useless.

1 comment:

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