If all individuals in an economy had identical subjective rates of time preference and?

Question

If all individuals in an economy had identical subjective rates of time preference and

degrees of risk aversion, how would their total utility be affected by the introduction of a

capital market?

would it be positive or negative or would there be no effect at all??...can you actually say from this info..ta

Answer 1

Even if everyone has identical time and risk-aversion preferences, capital markets will raise total utility.  This can be seen by allowing differences in wealth between participants and by allowing the development of technology.  

First, capital markets will provide a place for investment of excess wealth.  Second and related point is that when new technology is developed, there will be opportunities to invest in that technology through the capital markets.  If we assume that the technology is proven, then the investment could have positive risk/return characteristics.  The investment may then be beneficial for both the investor and the company as the capital market acts as a distributor of capital to the best technologies.  This will happen even though the risk and time preferences are the same, because technology development introduces a net benefit above the associated risk.