Expected Growth Criterion: An Axiomatization
Joshua Lawson
TL;DR
This paper characterizes the axioms under which an agent's preferences align with maximizing long-term wealth growth, clarifying the foundations of Ergodicity Economics and its differences from traditional models.
Contribution
It provides necessary and sufficient axioms for preferences to be represented by a unique ergodic transformation, advancing the theoretical basis of Ergodicity Economics.
Findings
Identifies axioms for preferences maximizing long-term wealth growth
Clarifies the divergence of Ergodicity Economics from classical models
Provides a formal axiomatization of ergodic preference representation
Abstract
I provide necessary and sufficient conditions for an agent's preferences to be represented by a unique ergodic transformation. Put differently, if an agent seeks to maximize the time average growth of their wealth, what axioms must their preferences obey? By answering this, I provide economic theorists a clear view of where "Ergodicity Economics" deviates from established models.
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Taxonomy
TopicsEconomic theories and models · Economic Theory and Institutions