Risk Preferences and the Economics of Contracts

TLDR

Risk‑aversion literature is a rich source of ad hoc assumptions about tastes, often used as a convenient crutch when analysis stalls. Assumptions of taste differences reveal no significant behavior and merely create the illusion of considered judgment while masking analytical failures. Stigler and Becker (1977, p.

Abstract

[T]he literature of risk aversion and risk preference [is] one of the richest sources of ad hoc assumptions concerning tastes. ... [N]o significant behavior has been illuminated by assumptions of differences in tastes. ... [Such theories] have been a convenient crutch to lean on when the analysis has bogged down. ... They give the appearance of considered judgement, yet really have only been ad hoc arguments that disguise analytical failures. -George J. Stigler and Gary S. Becker (1977 p. 89)