## $1.049 Million... … and the ultimate walk-to-work house. At a 4.25% nominal interest rate, figuring 2% average inflation and a 40% combined federal-and-state marginal tax rate, the real interest cost of a$1 million house is $5,500/year… … plus$15,000/year in property taxes…

… plus $7,000/year in insurance… … that is a total economic cost of$27,500/year, or $2,300/month--we could not rent anything close for anything approaching that, even factoring in the maintenance that the landlord would do. It's really very cheap… … plus it is a$55,000/year forced-savings program as you pay down the real and nominal principal--but that isn't a problem but an advantage: we like forced-savings programs…

… plus it is an enormous bet on the Berkeley housing market: a bet of unknown expected value and large variance--say a standard deviation of $200 thousand… … but I firmly believe that risk aversion comes from declining marginal utility of wealth: that as the trustee of all my possible future selves I am willing to make utility tradeoffs among them, knowing that wealth at the margin produces more utility for those possible future selves that are poor than for those who are rich… … and I know that in a life-cycle perspective even losing$400 thousand in the Berkeley housing market would not materially move the needle on my lifetime marginal utility of wealth, so I really should be risk-neutral with respect to such bets…

Question: do I have a moral (or a professional) obligation to act as if I were a rational utility-maximizing von Neumann-Morgenstern agent even if doing so makes me anxious?