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Abstract
In a risky world, a pessimist assumes the worst will happen. Someone who ignores risk altogether is an optimist. A consumer who is a realist faces a much more difficult problem, but will choose a level of spending somewhere between that of the pessimist and the optimist. We use this fact to redefine the space in which the realist searches for optimal consumption rules.
Citation
Carroll, Christopher, Karsten Chipeniuk, Alan Lujan, Kiichi Tokuoka, and Weifeng Wu. 2025. “The Method of Moderation.” https://econ-ark.github.io/method-of-moderation/.
Funding
Supported by Alfred P. Sloan Foundation through Grant No. G-2017-9832.