Under uncertainty, you must have a risk aversion parameter -- even if you try to avoid specifying one, your choice will point to an implicit one.
A made-up risk aversion parameter might also be a reasonable way to go about things, though making up a utility function and using the implicit risk aversion from that seems easier. The personal financial planning advice I've seen doesn't use any quantitative approach whatsoever to price risk, which leads to people just going with their gut, which is what I'm calling dumb.
making up a utility function and using the implicit risk aversion from that seems easier.
Um, I feel there is some confusion here. First, let's make distinct what I'll call a broad utility function and a narrow utility function. The argument to the broad utility function is the whole state of the universe and it outputs how much do you like this particular state of the entire world. The argument to the narrow utility function is a specific, certain amount of something, usually money, and it outputs how much you like this something regardless of the state...
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