Rationality Under Uncertainty: Classic and Current Criticisms of the Bayesian Viewpoint
Forthcoming in The European Journal of the History of Economic Thought
33 Pages Posted: 4 Oct 2018
Date Written: September 1, 2018
At least since Leonard Savage’s extension of von Neumann and Morgenstern’s expected utility, rational choice theory has been interpreted as a theory prescribing what individuals should do in any decision context, ranging from certainty to risk and uncertainty. After decades this received view, usually termed Bayesian, has been criticized for its normative content. This paper compares the current critique of the notion of Bayesian rationality, proposed by Itzhak Gilboa, with Daniel Ellsberg’s classic critique of Savage’s understanding of rationality. The paper argues that Ellsberg’s classic analysis of Savage’s theory totally anticipated today’s criticism.
Keywords: Rationality, Uncertainty, Decision Theory, Ellsberg Paradox
JEL Classification: B21, B41, D80
Suggested Citation: Suggested Citation