The notes below are our attempt to re-develop economic theory from scratch, namely starting with the axiom that individuals optimize what happens to them over time, not what happens to them on aver…
If you pick up a random book on ergodic theory, you're likely to understand nothing. It's a forbiddingly technical field, and the key concepts are often buried in formalism. I recommend our lecture notes instead (to be updated some time later this year).
Averaging over many people, it's true that the expected value of wealth increases. But if you watch one person's wealth over time, it decreases! If you work it out, you get sqrt(0.6*1.5) ~= 0.95 times as much wealth at each time step. (from
Significant losses having a greater effect than equally-sized gains is a feature of exponential growth. Thats mathematics, not psychology. Not everyone calls that loss aversion.
History is very helpful. (Non-)ergodicity wasn't available as a concept when economics laid its foundations. And it generates a very different perspective. Observations currently treated as behavioral anomalies are often formal model predictions.
Caveat: I don't know any of this academic literature and am probably reinventing a bunch of stuff. The lecture notes have lots more on this topic.