Shackle and Modern Decision Theory

35 Pages Posted: 11 Jan 2008

See all articles by Marcello Basili

Marcello Basili

University of Siena - Dipartimento di Economia Politica; University of Siena - Department of Economic Policy, Finance and Development

Carlo Zappia

University of Siena - Department of Economics and Statistics

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Abstract

The paper discusses the role of George L. S. Shackle in fostering an unconventional approach to individual decision making. Shackle's peculiar place in the history of economics is attested by the fact that, over the period going from von Neumann and Morgenstern's Theory of Games up to early 1970s, he was the single critic of the probabilistic approach to decision making who proposed an alternative formal corpus for dealing with uncertainty. The main aim of the paper is to analyse Shackle's non-probabilistic conceptualisation of individual decisions under uncertainty from a specific viewpoint, namely, that of a possible connection between his theory and one of the most interesting recent approaches to decision under uncertainty, the so-called non-additive probability approach of Gilboa and Schmeidler. The paper shows that these developments in modern decision theory take Shackle's issue seriously. The paper argues that the non-additive approach to decision theory confirms that the reliance of strict Bayesian theory on probabilistic judgements based on point-probability estimates, a reliance that Shackle intended to oppose, is untenable, and supports Shackle's arguments against standard probability calculus. Non-additive decision theory also provides a usage of non-additive probability distributions in choice that is an alternative to Shackle's approach of using a qualitative notion of probability, such as potential surprise.

Keywords: uncertainty, potential surprise, non-additive probability

JEL Classification: B21, D81

Suggested Citation

Basili, Marcello and Zappia, Carlo, Shackle and Modern Decision Theory. Metroeconomica, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1082704

Marcello Basili

University of Siena - Dipartimento di Economia Politica ( email )

Piazza San Francesco 7
Siena, 53100
Italy

University of Siena - Department of Economic Policy, Finance and Development ( email )

Piazza San Francesco, 7
Siena, 53100
Italy

Carlo Zappia (Contact Author)

University of Siena - Department of Economics and Statistics ( email )

Piazza San Francesco 7
Siena, Siena 53100
Italy

HOME PAGE: http://docenti-deps.unisi.it/carlozappia/

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