Suppose that you prefer A to B, B to C, and C to A. Your preferences violate Expected Utility Theory by being cyclic. Money-pump arguments offer a way to show that such violations are irrational. Suppose that you start with A. Then you should be willing to trade A for C and then C for B. But then, once you have B, you are offered a trade back to A for a small cost. Since you prefer A to B, you (...) pay the small sum to trade from B to A. But now you have been turned into a money pump. You are back to the alternative you started with but with less money. This Element shows how each of the axioms of Expected Utility Theory can be defended by money-pump arguments of this kind. The Element also defends money-pump arguments from the standard objections to this kind of approach. This title is also available as Open Access on Cambridge Core. (shrink)

In their recently published book Nudge (2008) Richard H. Thaler and Cass R. Sunstein (T&S) defend a position labelled as ‘libertarian paternalism’. Their thinking appeals to both the right and the left of the political spectrum, as evidenced by the bedfellows they keep on either side of the Atlantic. In the US, they have advised Barack Obama, while, in the UK, they were welcomed with open arms by the David Cameron's camp (Chakrabortty 2008). I will consider the following questions. What (...) is Nudge? How is it different from social advertisement? Does Nudge induce genuine preference change? Does Nudge build moral character? Is there a moral difference between the use of Nudge as opposed to subliminal images to reach policy objectives? And what are the moral constraints on Nudge? (shrink)

This paper describes an alternative to the common view that explanation in the special sciences involves subsumption under laws. According to this alternative, whether or not a generalization can be used to explain has to do with whether it is invariant rather than with whether it is lawful. A generalization is invariant if it is stable or robust in the sense that it would continue to hold under a relevant if it is stable or robust in the sense that it (...) would continue to hold under a relevant class of changes. Unlike lawfulness, invariance comes in degrees and has other features that are well suited to capture the characteristics of explanatory generalizations in the special sciences. For example, a generalization can be invariant even if it has exceptions or holds only over a limited spatio-temporal interval. The notion of invariance can be used to resolve a number of dilemmas that arise in standard treatments of explanatory generalizations in the special sciences. (shrink)

Decisions are made under uncertainty when there are distinct outcomes of a given action, and one is uncertain to which the act will lead. Decisions are made under indeterminacy when there are distinct outcomes of a given action, and it is indeterminate to which the act will lead. This paper develops a theory of (synchronic and diachronic) decision-making under indeterminacy that portrays the rational response to such situations as inconstant. Rational agents have to capriciously and randomly choose how to resolve (...) the indeterminacy relevant to a given choice-situation, but such capricious choices once made constrain how they will choose in the future. The account is illustrated by the case of self-interested action in situations where it is indeterminate whether you yourself will survive to benefit or suffer the consequences. The conclusion emphasizes some distinctive anti-hedging predictions of the account. (shrink)

p. cm. — (Zeuthen lecture book series) Includes bibliographical references (p. ) and index. ISBN 0-262-18187-8 (hardcover : alk. paper). — ISBN 0-262-68100-5 (pbk. : alk. paper) 1. Decision-making. 2. Economic man. 3. Game theory. 4. Rational expectations (Economic theory) I. Title. II. Series.

When does it make sense to act randomly? A persuasive argument from Bayesian decision theory legitimizes randomization essentially only in tie-breaking situations. Rational behaviour in humans, non-human animals, and artificial agents, however, often seems indeterminate, even random. Moreover, rationales for randomized acts have been offered in a number of disciplines, including game theory, experimental design, and machine learning. A common way of accommodating some of these observations is by appeal to a decision-maker’s bounded computational resources. Making this suggestion both precise (...) and compelling is surprisingly difficult. Toward this end, I propose two fundamental rationales for randomization, drawing upon diverse ideas and results from the wider theory of computation. The first unifies common intuitions in favour of randomization from the aforementioned disciplines. The second introduces a deep connection between randomization and memory: access to a randomizing device is provably helpful for an agent burdened with a finite memory. Aside from fit with ordinary intuitions about rational action, the two rationales also make sense of empirical observations in the biological world. Indeed, random behaviour emerges more or less where it should, according to the proposal. (shrink)

This paper is about the role of interpersonal comparisons in Harsanyi's aggregation theorem. Harsanyi interpreted his theorem to show that a broadly utilitarian theory of distribution must be true even if there are no interpersonal comparisons of well-being. How is this possible? The orthodox view is that it is not. Some argue that the interpersonal comparability of well-being is hidden in Harsanyi's premises. Others argue that it is a surprising conclusion of Harsanyi's theorem, which is not presupposed by any one (...) of the premises. I argue instead that Harsanyi was right: his theorem and its weighted-utilitarian conclusion do not require interpersonal comparisons of well-being. The key to making sense of this possibility is to treat Harsanyi's weights as dimensional constants rather than dimensionless numbers. (shrink)

"A Survey of Ranking Theory": The paper gives an up-to-date survey of ranking theory. It carefully explains the basics. It elaborates on the ranking theoretic explication of reasons and their balance. It explains the dynamics of belief statable in ranking terms and indicates how the ranks can thereby be measured. It suggests how the theory of Bayesian nets can be carried over to ranking theory. It indicates what it might mean to objectify ranks. It discusses the formal and the philosophical (...) aspects of the tight relation and the complementarity of ranks and probabilities. It closes with comparative remarks on predecessors and other philosophical proposals as well as formal models developed in AI. (shrink)

This paper defends revealed preference theory against a pervasive line of criticism, according to which revealed preference methodology relies on appealing to some mental states, in particular an agent’s beliefs, rendering the project incoherent or unmotivated. I argue that all that is established by these arguments is that revealed preference theorists must accept a limited mentalism in their account of the options an agent should be modelled as choosing between. This is consistent both with an essentially behavioural interpretation of preference (...) and with standard revealed preference methodology. And it does not undermine the core motivations of revealed preference theory. (shrink)

Abstract:This paper explores the contrast between mentalistic and behaviouristic interpretations of decision theory. The former regards credences and utilities as psychologically real, while the latter regards them as mere representations of an agent's preferences. Philosophers typically adopt the former interpretation, economists the latter. It is argued that the mentalistic interpretation is preferable if our aim is to use decision theory for descriptive purposes, but if our aim is normative then the behaviouristic interpretation cannot be dispensed with.

Many authors in ethics, economics, and political science endorse the Lottery Requirement, that is, the following thesis: where different parties have equal moral claims to one indivisible good, it is morally obligatory to let a fair lottery decide which party is to receive the good. This article defends skepticism about the Lottery Requirement. It distinguishes three broad strategies of defending such a requirement: the surrogate satisfaction account, the procedural account, and the ideal consent account, and argues that none of these (...) strategies succeed. The article then discusses and discharges some remaining grounds for resistance to these skeptical conclusions, as well as the possibility of defending a weaker version of a normative lottery principle. The conclusion is that we have no reason to believe that where equal claims conflict, we are morally required to hold a lottery, as opposed to simply picking one of the parties on more subjective grounds or out of pure whim. In addition to the practical consequences of this skeptical view, the article sketches some theoretical implications for debates about saving the greater number and about axiomatic utilitarianism. (shrink)

We give two social aggregation theorems under conditions of risk, one for constant population cases, the other an extension to variable populations. Intra and interpersonal welfare comparisons are encoded in a single ‘individual preorder’. The theorems give axioms that uniquely determine a social preorder in terms of this individual preorder. The social preorders described by these theorems have features that may be considered characteristic of Harsanyi-style utilitarianism, such as indifference to ex ante and ex post equality. However, the theorems are (...) also consistent with the rejection of all of the expected utility axioms, completeness, continuity, and independence, at both the individual and social levels. In that sense, expected utility is inessential to Harsanyi-style utilitarianism. In fact, the variable population theorem imposes only a mild constraint on the individual preorder, while the constant population theorem imposes no constraint at all. We then derive further results under the assumption of our basic axioms. First, the individual preorder satisfies the main expected utility axiom of strong independence if and only if the social preorder has a vector-valued expected total utility representation, covering Harsanyi’s utilitarian theorem as a special case. Second, stronger utilitarian-friendly assumptions, like Pareto or strong separability, are essentially equivalent to strong independence. Third, if the individual preorder satisfies a ‘local expected utility’ condition popular in non-expected utility theory, then the social preorder has a ‘local expected total utility’ representation. Fourth, a wide range of non-expected utility theories nevertheless lead to social preorders of outcomes that have been seen as canonically egalitarian, such as rank-dependent social preorders. Although our aggregation theorems are stated under conditions of risk, they are valid in more general frameworks for representing uncertainty or ambiguity. (shrink)

Deidealization as a topic in its own right has attracted remarkably little philosophical interest despite the extensive literature on idealization. One reason for this is the often implicit assumption that idealization and deidealization are, potentially at least, reversible processes. We question this assumption by analyzing the challenges of deidealization within a menu of four broad categories: deidealizing as recomposing, deidealizing as reformulating, deidealizing as concretizing, and deidealizing as situating. On closer inspection, models turn out much more inflexible than the reversal (...) thesis would have us believe, and deidealization emerges as a creative part of modeling. (shrink)

The coordinated attack scenario and the electronic mail game are two paradoxes of common knowledge. In simple mathematical models of these scenarios, the agents represented by the models can coordinate only if they have common knowledge that they will. As a result, the models predict that the agents will not coordinate in situations where it would be rational to coordinate. I argue that we should resolve this conflict between the models and facts about what it would be rational to do (...) by rejecting common knowledge assumptions implicit in the models. I focus on the assumption that the agents have common knowledge that they are rational, and provide models to show that denying this assumption suffices for a resolution of the paradoxes. I describe how my resolution of the paradoxes fits into a general story about the relationship between rationality in situations involving a single agent and rationality in situations involving many agents. (shrink)

Various theories try to give accounts of how measures of this confidence do or ought to behave, both as far as the internal mental consistency of the agent as ...

In general, the technical apparatus of decision theory is well developed. It has loads of theorems, and they can be proved from axioms. Many of the theorems are interesting, and useful both from a philosophical and a practical perspective. But decision theory does not have a well agreed upon interpretation. Its technical terms, in particular, ‘utility’ and ‘preference’ do not have a single clear and uncontroversial meaning. How to interpret these terms depends, of course, on what purposes in pursuit of (...) which one wants to put decision theory to use. One might want to use it as a model of economic decision-making, in order to predict the behavior of corporations or of the stock market. In that case, it might be useful to interpret the technical term ‘utility’ as meaning money profit. Decision theory would then be an empirical theory. I want to look into the question of what ‘utility’ could mean, if we want decision theory to function as a theory of practical rationality. I want to know whether it makes good sense to think of practical rationality as fully or even partly accounted for by decision theory. I shall lay my cards on the table: I hope it does make good sense to think of it that way. For, I think, if Humeans are right about practical rationality, then decision theory must play a very large part in their account. And I think Humeanism has very strong attractions. (shrink)

Certain ethical views hold that we should pay more attention, even exclusive attention, to the worst-case scenario. Prominent examples include Rawls's Difference Principle and the Precautionary Principle. These views can be anchored in formal principles of decision theory, in two different ways. On the one hand, they can rely on ambiguity-aversion: the idea that we cannot assign sharp probabilities to various scenarios, and that if we cannot assign sharp probabilities, we should decide pessimistically, as if the probabilities are unfavorable. On (...) the other hand, they can rely on risk-avoidance: the idea that we should pay more attention to worse scenarios, even when we can assign sharp probabilities. I distinguish these two foundations. I also show how they can be modified to support versions of these views that pay more but not exclusive attention to worst-case scenarios. Finally, I argue that risk-avoidance provides a superior foundation than ambiguity-aversion for the Difference Principle and the Precautionary Principle; in particular, it correctly identifies which ethical facts should matter to those who champion these principles. (shrink)

Nobody's going to object to the advice "Do the right thing", but that doesn't mean everyone's always going to follow it. Sometimes this is because of our volitional limitations; we cannot always bring ourselves to make the sacrifices that right action requires. But sometimes this is because of our cognitive limitations; we cannot always be sure of what is right. Sometimes we can't be sure of what's right because we don't know the non-normative facts. But sometimes, even if we were (...) to know all of the non-normative facts, we'd still not be sure about what's right, because we're uncertain about the normative reasons those facts give us. In this dissertation, I attempt to answer the question of what we're to do when we must act under fundamentally normative uncertainty. It's tempting to think that, in such circumstances, we should do what we regard as most probably right. I argue that this view is mistaken, for it is insensitive to how degrees of actions' values compare across different normative hypotheses; if an action is probably right, but, if wrong, is terribly, terribly, wrong, it may be rational not to do that action. A better answer is that we should do the action with the highest expected value. I spend the first part of the dissertation providing arguments for and rebutting arguments against this view of action under normative uncertainty. I spend the next part of the dissertation explaining what degrees of value are, and showing how they can be compared across normative hypotheses. In the remaining parts of the dissertation, I consider two questions related to our primary question -- first, what is one required, or obligated, to do under normative uncertainty; and second, what is it rational for one to do when one is not only normatively uncertain in the way we've been discussing, but also uncertain about what it is rational to do under this sort of normative uncertainty. (shrink)

We distinguish three qualitatively different types of uncertainty—ethical, option and state space uncertainty—that are distinct from state uncertainty, the empirical uncertainty that is typically measured by a probability function on states of the world. Ethical uncertainty arises if the agent cannot assign precise utilities to consequences. Option uncertainty arises when the agent does not know what precise consequence an act has at every state. Finally, state space uncertainty exists when the agent is unsure how to construct an exhaustive state space. (...) These types of uncertainty are characterised along three dimensions—nature, object and severity—and the relationship between them is examined. We conclude that these different forms of uncertainty cannot be reduced to empirical uncertainty about the state of the world without inducing an increase in its severity. (shrink)

This is a comprehensive anthology of works concerning the nature of economics as a science, including classic texts and essays exploring specific branches and schools of economics. Apart from the classics, most of the selections in the third edition are new, as are the introduction and bibliography. No other anthology spans the whole field and offers a comprehensive introduction to questions about economic methodology.

Despite the ubiquity of uncertainty, scientific attention has focused primarily on probabilistic approaches, which predominantly rely on the assumption that uncertainty can be measured and expressed numerically. At the same time, the increasing amount of research from a range of areas including psychology, economics, and sociology testify that in the real world, people’s understanding of risky and uncertain situations cannot be satisfactorily explained in probabilistic and decision-theoretical terms. In this article, we offer a theoretical overview of an alternative approach to (...) uncertainty developed in the framework of the ecological rationality research program. We first trace the origins of the ecological approach to uncertainty in Simon’s bounded rationality and Brunswik’s lens model framework and then proceed by outlining a theoretical view of uncertainty that ensues from the ecological rationality approach. We argue that the ecological concept of uncertainty relies on a systemic view of uncertainty that features it as a property of the organism–environment system. We also show how simple heuristics can deal with unmeasurable uncertainty and in what cases ignoring probabilities emerges as a proper response to uncertainty. (shrink)

The social welfare functional approach to social choice theory fails to distinguish a genuine change in individual well-beings from a merely representational change due to the use of different measurement scales. A generalization of the concept of a social welfare functional is introduced that explicitly takes account of the scales that are used to measure well-beings so as to distinguish between these two kinds of changes. This generalization of the standard theoretical framework results in a more satisfactory formulation of welfarism, (...) the doctrine that social alternatives are evaluated and socially ranked solely in terms of the well-beings of the relevant individuals. This scale-dependent form of welfarism is axiomatized using this framework. The implications of this approach for characterizing classes of social welfare orderings are also considered. (shrink)

In recent years there has been a growing consensus that ordinary reasoning does not conform to the laws of classical logic, but is rather nonmonotonic in the sense that conclusions previously drawn may well be removed upon acquiring further information. Even so, rational belief formation has up to now been modelled as conforming to some fundamental principles that are classically valid. The counterexample described in this paper suggests that a number of the most cherished of these principles should not be (...) regarded as valid for commonsense reasoning. An explanation of this puzzling failure is given, arguing that a problem in the theory of rational choice transfers to the realm of belief formation. (shrink)

Some environmental ethicists and economists argue that attributing infinite value to the environment is a good way to represent an absolute obligation to protect it. Others argue against modelling the value of the environment in this way: the assignment of infinite value leads to immense technical and philosophical difficulties that undermine the environmentalist project. First, there is a problem of discrimination: saving a large region of habitat is better than saving a small region; yet if both outcomes have infinite value, (...) then decision theory prescribes indifference. Second, there is a problem of swamping probabilities: an act with a small but positive probability of saving an endangered species appears to be on par with an act that has a high probability of achieving this outcome, since both have infinite expected value. Our paper shows that a relative concept of infinite value can be meaningfully defined, and provides a good model for securing the priority of the natural environment while avoiding the failures noted by sceptics about infinite value. Our claim is not that the relative infinity utility model gets every detail correct, but rather that it provides a rigorous philosophical framework for thinking about decisions affecting the environment. (shrink)

How should we make choices where the values we subscribe to give conflicting recommendations? I will be defending a reduction of decision making under conflict to decision making under indeterminacy, in the spirit of Broome. To defend this, I set out and endorse the basic features of decision making under conflict that Ruth Chang identifies. I show that we find exactly those features in cases of decision making under indeterminacy not involving conflicting values. Further, my theory of decision making under (...) indeterminacy predicts and explains these features. Particular attention will be paid to the aspect that Chang emphasizes as the decisive problem for the Broomean reduction: the resolutional residue, or angst, that decision making under conflict evinces. (shrink)

Policymakers who seek to make scientifically informed decisions are constantly confronted by scientific uncertainty and expert disagreement. This thesis asks: how can policymakers rationally respond to expert disagreement and scientific uncertainty? This is a work of non-ideal theory, which applies formal philosophical tools developed by ideal theorists to more realistic cases of policymaking under scientific uncertainty. I start with Bayesian approaches to expert testimony and the problem of expert disagreement, arguing that two popular approaches— supra-Bayesianism and the standard model of (...) expert deference—are insufficient. I develop a novel model of expert deference and show how it can deal with many of these problems raised for them. I then turn to opinion pooling, a popular method for dealing with disagreement. I show that various theoretical motivations for pooling functions are irrelevant to realistic policymaking cases. This leads to a cautious recommendation of linear pooling. However, I then show that any pooling method relies on value judgements, that are hidden in the selection of the scoring rule. My focus then narrows to a more specific case of scientific uncertainty: multiple models of the same system. I introduce a particular case study involving hurricane models developed to support insurance decision-making. I recapitulate my analysis of opinion pooling in the context of model ensembles, confirming that my hesitations apply. This motivates a shift of perspective, to viewing the problem as a decision theoretic one. I rework a recently developed ambiguity theory, called the confidence approach, to take input from model ensembles. I show how it facilitates the resolution of the policymaker’s problem in a way that avoids the issues encountered in previous chapters. This concludes my main study of the problem of expert disagreement. In the final chapter, I turn to methodological reflection. I argue that philosophers who employ the mathematical methods of the prior chapters are modelling. Employing results from the philosophy of scientific models, I develop the theory of normative modelling. I argue that it has important methodological conclusions for the practice of formal epistemology, ruling out popular moves such as searching for counterexamples. (shrink)

Confronted with the possibility of severe environmental harms, such as catastrophic climate change, some researchers have suggested that we should abandon the principle at the heart of standard decision theory—the injunction to maximize expected utility—and embrace a different one: the Precautionary Principle. Arguably, the most sophisticated philosophical treatment of the Precautionary Principle is due to Steel. Steel interprets PP as a qualitative decision rule and appears to conclude that a quantitative decision-theoretic statement of PP is both impossible and unnecessary. In (...) this article, we propose a decision-theoretic formulation of PP in terms of lexical utilities. We show that this lexical model is largely faithful to Steel’s approach, but also that it corrects three problems with Steel’s account and clarifies the relationship between PP and standard decision theory. Using a range of examples, we illustrate how the lexical model can be used to explore a variety of issues related to precautionary reasoning. (shrink)

Public reason theories are characterized by three conditions: constructivism, representation, and stability. Constructivism holds that justification does not rely on any antecedent moral or political values outside of the procedure of agreement. Representation holds that the reasons for the choice in the model must be rationally explicable to real agents outside the model. Stability holds that the principles chosen in the procedure should be stable upon reflection, especially in the face of diversity in a pluralistic society. Choice procedures that involve (...) at least two-stages with different information, as Rawls’s theory does, will be path-dependent and not meet the condition of representation since it will not be globally coherent. Attempts to solve this problem without eliminating the segmentation of choice in the procedure will run afoul of constructivism or stability. This problem is instructive because it highlights how public reason theories must evolve in the face of increased concerns about diversity. (shrink)

The difficulty of defining rational behavior in game situations is that the players'' strategies will depend on their expectations about other players'' strategies. These expectations are beliefs the players come to the game with. Game theorists assume these beliefs to be rational in the very special sense of beingobjectively correct but no explanation is offered of the mechanism generating this property of the belief system. In many interesting cases, however, such a rationality requirement is not enough to guarantee that an (...) equilibrium will be attained. In particular, I analyze the case of multiple equilibria, since in this case there exists a whole set of rational beliefs, so that no player can ever be certain that the others believe he has certain beliefs. In this case it becomes necessary to explicitly model the process of belief formation. This model attributes to the players a theory of counterfactuals which they use in restricting the set of possible equilibria. If it were possible to attribute to the players the same theory of counterfactuals, then the players'' beliefs would eventually converge. (shrink)

The precautionary principle is invoked in a number of important personal and policy decision contexts. Peterson shows that certain ways of making the principle precise are inconsistent with other criteria of decision-making. Some object that the results do not apply to cases of deep uncertainty or value incommensurability which are alleged to be in the principle’s wheelhouse. First, I show that Peterson’s impossibility results can be generalized considerably to cover cases of both deep uncertainty and incommensurability. Second, I contrast an (...) alternative way of giving voice to the precautionary impulse. (shrink)

Experimental results on the Ellsberg paradox typically reveal behavior that is commonly interpreted as ambiguity aversion. The experiments reported in the current paper find the objective probabilities for drawing a red ball that make subjects indifferent between various risky and uncertain Ellsberg bets. They allow us to examine the predictive power of alternative principles of choice under uncertainty, including the objective maximin and Hurwicz criteria, the sure-thing principle, and the principle of insufficient reason. Contrary to our expectations, the principle of (...) insufficient reason performed substantially better than rival theories in our experiment, with ambiguity aversion appearing only as a secondary phenomenon. (shrink)

The relations between rationality and optimization have been widely discussed in the wake of Herbert Simon's work, with the common conclusion that the rationality concept does not imply the optimization principle. The paper is partly concerned with adding evidence for this view, but its main, more challenging objective is to question the converse implication from optimization to rationality, which is accepted even by bounded rationality theorists. We discuss three topics in succession: (1) rationally defensible cyclical choices, (2) the revealed preference (...) theory of optimization, and (3) the infinite regress of optimization. We conclude that (1) and (2) provide evidence only for the weak thesis that rationality does not imply optimization. But (3) is seen to deliver a significant argument for the strong thesis that optimization does not imply rationality. (shrink)

Drawing on research in the psychology of judgment and decision making, I argue that individual economists acting as experts in matters of public policy are likely to be victims of significant overconfidence. The case is based on the pervasiveness of the phenomenon, the nature of the task facing economists?as?experts, and the character of the institutional constraints under which they operate. Moreover, I argue that economist overconfidence can have dramatic consequences. Finally, I explore how the negative consequences of overconfidence can be (...) mitigated, and how the phenomenon can be reduced or eliminated. As a case study, I discuss the involvement of Western experts in post?communist Russian economic reforms. (shrink)

Rational choice theory enjoys unprecedented popularity and influence in the behavioral and social sciences, but it generates intractable problems when applied to socially interactive decisions. In individual decisions, instrumental rationality is defined in terms of expected utility maximization. This becomes problematic in interactive decisions, when individuals have only partial control over the outcomes, because expected utility maximization is undefined in the absence of assumptions about how the other participants will behave. Game theory therefore incorporates not only rationality but also common (...) knowledge assumptions, enabling players to anticipate their co-players' strategies. Under these assumptions, disparate anomalies emerge. Instrumental rationality, conventionally interpreted, fails to explain intuitively obvious features of human interaction, yields predictions starkly at variance with experimental findings, and breaks down completely in certain cases. In particular, focal point selection in pure coordination games is inexplicable, though it is easily achieved in practice; the intuitively compelling payoff-dominance principle lacks rational justification; rationality in social dilemmas is self-defeating; a key solution concept for cooperative coalition games is frequently inapplicable; and rational choice in certain sequential games generates contradictions. In experiments, human players behave more cooperatively and receive higher payoffs than strict rationality would permit. Orthodox conceptions of rationality are evidently internally deficient and inadequate for explaining human interaction. Psychological game theory, based on nonstandard assumptions, is required to solve these problems, and some suggestions along these lines have already been put forward. Key Words: backward induction; Centipede game; common knowledge; cooperation; epistemic reasoning; game theory; payoff dominance; pure coordination game; rational choice theory; social dilemma. (shrink)

Clear-cut cases of decision-making under risk (known probabilities) are unusual in real life. The gambler’s decisions at the roulette table are as close as we can get to this type of decision-making. In contrast, decision-making under uncertainty (unknown probabilities) can be exemplified by a decision whether to enter a jungle that may contain unknown dangers. Life is usually more like an expedition into an unknown jungle than a visit to the casino. Nevertheless, it is common in decision-supporting disciplines to proceed (...) as if reasonably reliable probability estimates were available for all possible outcomes, i.e. as if the prevailing epistemic conditions were analogous to those of gambling at the roulette table. This mistake can be called the tuxedo fallacy. It is argued that traditional engineering practices such as safety factors and multiple safety barriers avoid this fallacy and that they therefore manage uncertainty better than probabilistic risk analysis (PRA). PRA is a useful tool, but it must be supplemented with other methods in order not to limit the analysis to dangers that can be assigned meaningful probability estimates. (shrink)

We reexamine some of the classic problems connected with the use of cardinal utility functions in decision theory, and discuss Patrick Suppes's contributions to this field in light of a reinterpretation we propose for these problems. We analytically decompose the doctrine of ordinalism, which only accepts ordinal utility functions, and distinguish between several doctrines of cardinalism, depending on what components of ordinalism they specifically reject. We identify Suppes's doctrine with the major deviation from ordinalism that conceives of utility functions as (...) representing preference differences, while being non- etheless empirically related to choices. We highlight the originality, promises and limits of this choice-based cardinalism. (shrink)

The basic axioms or formal conditions of decision theory, especially the ordering condition put on preferences and the axioms underlying the expected utility formula, are subject to a number of counter-examples, some of which can be endowed with normative value and thus fall within the ambit of a philosophical reflection on practical rationality. Against such counter-examples, a defensive strategy has been developed which consists in redescribing the outcomes of the available options in such a way that the threatened axioms or (...) conditions continue to hold. We examine how this strategy performs in three major cases: Sen's counterexamples to the binariness property of preferences, the Allais paradox of EU theory under risk, and the Ellsberg paradox of EU theory under uncertainty. We find that the strategy typically proves to be lacking in several major respects, suffering from logical triviality, incompleteness, and theoretical insularity. To give the strategy more structure, philosophers have developed “principles of individuation”; but we observe that these do not address the aforementioned defects. Instead, we propose the method of checking whether the strategy can overcome its typical defects once it is given a proper theoretical expansion. We find that the strategy passes the test imperfectly in Sen's case and not at all in Allais's. In Ellsberg's case, however, it comes close to meeting our requirement. But even the analysis of this more promising application suggests that the strategy ought to address the decision problem as a whole, rather than just the outcomes, and that it should extend its revision process to the very statements it is meant to protect. Thus, by and large, the same cautionary tale against redescription practices runs through the analysis of all three cases. A more general lesson, simply put, is that there is no easy way out from the paradoxes of decision theory. (shrink)

Do responsibility voids exist? That is, are there situations in which the group is collectively morally responsible for some outcome although no member can be held individually morally responsible for it? To answer these questions, I draw a distinction between competitive and cooperative decision contexts based on the team-reasoning account of cooperation. Accordingly, I provide a reasoning-based analysis of cooperation, competition, moral responsibility, and, last, potential responsibility voids. I then argue that competitive decision contexts are free of responsibility voids. The (...) conditions for the existence of responsibility voids in cooperative decision contexts depend on the type of uncertainty the group faces, either external or coordination uncertainty. (shrink)

The classical theory of rational choice is built on several important internal consistency conditions. In recent years, the reasonableness of those internal consistency conditions has been questioned and criticized, and several responses to accommodate such criticisms have been proposed in the literature. This paper develops a general framework to accommodate the issues raised by the criticisms of classical rational choice theory, and examines the broad impact of these criticisms from both normative and positive points of view.

Precautionary Principles are often said to be appropriate for decision-making in contexts of uncertainty such as climate policy. Contexts of uncertainty are contrasted to contexts of risk depending on whether we have probabilities or not. Against this view, I argue that the risk-uncertainty distinction is practically irrelevant. I start by noting that the history of the distinction between risk and uncertainty is more varied than is sometimes assumed. In order to examine the distinction, I unpack the idea of having probabilities, (...) in particular by distinguishing three interpretations of probability: objective, epistemic, and subjective probability. I then claim that if we are concerned with whether we have probabilities at all—regardless of how low their epistemic credentials are—then we almost always have probabilities for policy-making. The reason is that subjective and epistemic probability are the relevant interpretations of probability and we almost always have subjective and epistemic probabilities. In contrast, if we are only concerned with probabilities that have sufficiently high epistemic credentials, then we obviously do not always have probabilities. Climate policy, for example, would then be a case of decision-making under uncertainty. But, so I argue, we should not dismiss probabilities with low epistemic credentials. Rather, when they are the best available probabilities our decision principles should make use of them. And, since they are almost always available, the risk-uncertainty distinction remains irrelevant. (shrink)

The paper is motivated by the need of accounting for the practical syllogism as a piece of defeasible reasoning. To meet the need, the paper first refers to ranking theory as an account of defeasible descriptive reasoning. It then argues that two kinds of ought need to be distinguished, purely normative and fact-regarding obligations (in analogy to intrinsic and extrinsic utilities). It continues arguing that both kinds of ought can be iteratively revised and should hence be represented by ranking functions, (...) too, just as iteratively revisable beliefs. Its central proposal will then be that the fact-regarding normative ranking function must be conceived as the sum of a purely normative ranking function and an epistemic ranking function (as suggested in qualitative decision theory). The distinctions defends this proposal with a comparative discussion of some critical examples and some other distinctions made in the literature. It gives a more rigorous justification of this proposal. Finally, it starts developing the logic of purely normative and of fact-regarding normative defeasible reasoning, points to the difficulties of completing the logic of the fact-regarding side, but reaches the initial aim of accounting for the defeasible nature of the practical syllogism. (shrink)

The paper has a twofold aim. On the one hand, it provides what appears to be the first game-theoretic modeling of Napoleon’s last campaign, which ended dramatically on 18 June 1815 at Waterloo. It is specifically concerned with the decision Napoleon made on 17 June 1815 to detach part of his army against the Prussians he had defeated, though not destroyed, on 16 June at Ligny. Military historians agree that this decision was crucial but disagree about whether it was rational. (...) Hypothesizing a zero-sum game between Napoleon and Blücher, and computing its solution, we show that it could have been a cautious strategy on the former's part to divide his army, a conclusion which runs counter to the charges of misjudgement commonly heard since Clausewitz. On the other hand, the paper addresses methodological issues. We defend its case study against the objections of irrelevance that have been raised elsewhere against “analytic narratives”, and conclude that military campaigns provide an opportunity for successful application of the formal theories of rational choice. Generalizing the argument, we finally investigate the conflict between narrative accounts – the historians' standard mode of expression – and mathematical modeling. (shrink)

While the foundations of climate science and ethics are well established, fine-grained climate predictions, as well as policy-decisions, are beset with uncertainties. This chapter maps climate uncertainties and classifies them as to their ground, extent and location. A typology of uncertainty is presented, centered along the axes of scientific and moral uncertainty. This typology is illustrated with paradigmatic examples of uncertainty in climate science, climate ethics and climate economics. Subsequently, the chapter discusses the IPCC’s preferred way of representing uncertainties and (...) evaluates its strengths and weaknesses from a risk management perspective. Three general strategies for decision-makers to cope with climate uncertainty are outlined, the usefulness of which largely depends on whether or not decision-makers find themselves in a context of deep uncertainty. The chapter concludes by offering two recommendations to ease the work of policymakers, faced with the various uncertainties engrained in climate discourse. (shrink)

Contents. Introduction. 1. Preliminaries. 2. Normal Form Games. 3. Extensive Games. 4. Applications of Game Theory. 5. The Methodology of Game Theory. Conclusion. Appendix. Bibliography. Index. Does game theory—the mathematical theory of strategic interaction—provide genuine explanations of human behaviour? Can game theory be used in economic consultancy or other normative contexts? Explaining Games: The Epistemic Programme in Game Theory—the first monograph on the philosophy of game theory—is an attempt to combine insights from epistemic logic and the philosophy of science to (...) investigate the applicability of game theory in such fields as economics, philosophy and strategic consultancy. I prove new mathematical theorems about the beliefs, desires and rationality principles of individual human beings, and explore in detail the logical form of game theory as it is used in explanatory and normative contexts. I argue that game theory reduces to rational choice theory if used as an explanatory device, and that game theory is nonsensical if used as a normative device. A provocative account of the history of game theory reveals that this is not bad news for all of game theory, though. Two central research programmes in game theory tried to find the ultimate characterisation of strategic interaction between rational agents. Yet, while the Nash Equilibrium Refinement Programme has done badly thanks to such research habits as overmathematisation, model-tinkering and introversion, the Epistemic Programme, I argue, has been rather successful in achieving this aim. "The 'epistemic' approach to game theory has emerged over the past twenty-five years. What is this approach? How does it differ from the conventional equilibrium-based approach to game theory? What have been its strengths and weaknesses to date? To find out, read this comprehensive and excellently written account". Adam Brandenburger, J. P. Valles Professor of Business Economics and Strategy, Stern School of Business, New York University "Reading Boudewijn de Bruin's book should be rewarding both for game theorists interested in the conceptual foundations of their discipline and for philosophers who want to learn more about formal analysis of strategic interaction. It provides an in-depth logical study of the currently dominant epistemic approaches to non-cooperative games, with an eye both to the attractions and to the serious challenges facing the Epistemic Programme". Wlodek Rabinowicz, Professor of Practical Philosophy, Department of Philosophy, Lund University . (shrink)

For the past 20 years or so the literature on noncooperative games has been centered on the search for an equilibrium concept that expresses the notion of rational behavior in interactive situations. A basic tenet in this literature is that if a “rational solution” exists, it must be a Nash equilibrium. The consensus view, however, is that not all Nash equilibria can be accepted as rational solutions. Consider, for example, the game of Figure 1.