[mananaysiempre]

> It's only a paradox if we think it shows that people are not "rational". But I think it simply shows EV is not a good measure of risk, and everyone knows it.

There are standard arguments (e.g. the Von Neumann–Morgenstern utility theorem) that an agent with rational preferences, with remarkably weak definitions of the word “rational”, must have an utility function and a subjective probability function such that their behaviour is always governed by the EV of that utility with respect to that probability.

[carlob]

Yeah but that utility function will not be a linear function of money so you can't say EV(u($$)) == u(EV($$)). This is the mathematical formulation that tells you that it is irrational to risk all your money to make an extra dollar even if u(EV($$)) is positive EV(u($$)) can be negative.