What Caledonian is discussing is the certainty effect- essentially, having a term in your utility function for not having to multiply probabilities to get an expected value. That’s different from risk aversion, which is just a statement that the utility function is concave.
He makes it clearer in comments.
What Caledonian is discussing is the certainty effect- essentially, having a term in your utility function for not having to multiply probabilities to get an expected value. That’s different from risk aversion, which is just a statement that the utility function is concave.