The evolution of risk attitudes with fertility thresholds

Arthur Robson and Larry Samuelson

Journal of Economic Theory, 2022, vol. 205, issue C

Abstract: We examine the evolutionary selection of attitudes toward aggregate risk in an age structured population. Aggregate shocks perturb the population's consumption possibilities. Consumption is converted to fertility via a technology that exhibits first increasing and then decreasing returns to scale, captured in the simplest case by a fertility threshold. We show that evolution will select preferences that exhibit arbitrarily high aversion to aggregate risks with even very small probabilities of sufficiently low outcomes. These findings complement the familiar result that evolution will select for greater aversion to aggregate than idiosyncratic risks by identifying circumstances under which the difference can be extreme.

Keywords: Evolution; Risk aversion; Aggregate risk; Age structured population (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:205:y:2022:i:c:s0022053122001429

DOI: 10.1016/j.jet.2022.105552

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