Metatickles and the dynamics of deliberation

The traditional or orthodox decision rule of maximizing conditional expected utility has recently come under attack by critics who advance alternative causal decision theories. The traditional theory has, however, been defended. And these defenses have in turn been criticized. Here, I examine two objections to such defenses and advance a theory about the dynamics of deliberation (a diachronic theory about the process of deliberation) within the framework of which both objections to the defenses of the traditional theory fail.     

Decomposing Hindsight Bias

Traditional accounts of hindsight bias inadequately distinguish primary hindsight bias from both secondary and tertiary hindsight bias. A subject exhibits primary bias when she assigns a higher ex ante probability estimate to actual outcomes, secondary bias when she believes that she herself would have made the same estimate of the prior probability of an event before receiving outcome information as she made after receiving it, and tertiary bias when she believes that third parties lacking outcome information were unreasonable if they did not make the same prior probability judgments that subjects now possessing such information make.In our experiments, we find that when people can readily calculate the actual ex ante probability of an outcome, they don't reassess that probability when told what outcomes actually occurred. They reassess only in situations in which they are unable to assess prior probabilities or when given information that the outcome was not simply a result of sampling or chance but the result of an imperceptible feature of the initial situation. Observed primary bias may therefore often be rational.     

A strategic foundation for the cooperator's advantage

Orbell and Dawes develop a non-game theoretic heuristic that yields a cooperator's advantage by allowing players to project their own cooperate-defect choices onto potential partners (1991, p. 515). With appropriate parameter values their heuristic yields a cooperative environment, but the cooperation depends, simply, on optimism about others' behavior (1991, p. 526). In earlier work, Dawes (1989) established a statistical foundation for such optimism. In this paper, I adapt some of the concerns of Dawes (1989) and develop a game theoretic model based on a modification of the Harsanyi structure of games with incomplete information (1967–1968). I show that the commonly made conjecture that strategic play is incompatible with cooperation and the cooperator's advantage is false.     

Objective knowledge out of ignorance: Popper on body,mind, and the third world

In the fifties, Popper defended an interactionistic version of body-mind dualism. It distinguished between the world of physical bodies and states and the world of mental states. Later he added a third world of objective thought contents. He claims the assumption that there is the third world is a necessary presupposition of problem-solving in general and of his philosophy of science in particular. The present article contains separate reasonings to the effect that this presupposition is neither necessary nor even possible. It is further argued that postulating the existence of entities makes sense only relative to a criterion of ontological commitment, which Popper does not mention and obviously does not have, and that in addition it presupposes a theory, which is tentatively accepted as true and which according to the criterion implies the existence of the entities. But as yet there is no testable theory involving terms like mind, intention etc., which made the notion that itself or its terms are essentially different from what is already known in the empirical sciences at least plausible. Therefore the body-mind controversy is still pointless. Popper's stand on it seems to be but a reflex of his anti-behavioristic and anti-psychologistic attitude.     

Fairness,Public Good,and Emotional Aspects of Punishment Behavior

We report an experiment on two treatments of an ultimatum minigame. In one treatment, responders reactions are hidden to proposers. We observe high rejection rates reflecting responders intrinsic resistance to unfairness. In the second treatment, proposers are informed, allowing for dynamic effects over eight rounds of play. The higher rejection rates can be attributed to responders provision of a public good: Punishment creates a group reputation for being tough and effectively educate proposers. Since rejection rates with informed proposers drop to the level of the treatment with non-informed proposers, the hypothesis of responders enjoyment of overt punishment is not supported.     

Impersonal probability as an ideal assessment based on accessible evidence: A viable construct?

When risk analysts and others refer to the true probability of an event, it is not easy to give it a meaning which is sound and useful as a communication device for regulatory, research planning, and related purposes. An interpretation is herein offered which, unlike Bayesian probability, is impersonal and does not depend on a particular assessor; unlike Carnap's logical probability, it does not depend on information actually to hand. It is a generalization of frequency and propensity interpretations of impersonal probability applicable to unique events: an ideal assessment based on currently accessible (not in general perfect) evidence. The argument is illustrated from decision-aiding experience which motivated the enquiry.This work was supported by the National Science Foundation, Division of Social and Economic Sciences. The author thanks John Pratt, Marvin Cohen, Dennis Lindley, Jon Baron, Kathy Laskey, and Stephen Watson for their most helpful review. They do not necessarily share his views.     

Majority vote of even and odd experts in a polychotomous choice situation

The performance of majority vote by an odd number of voters in a dichotomous situation is a much-studied subject. In this paper, we study the performance of group consensus in a situation of polychotomous choice. The differences in majority vote behaviour between even and odd numbers of expert panellists are examined, and the effects of adding new members are derived. Unlike the dichotomous model, optimality in the present context may not be uniquely defined, so the probabilities of the consensus being correct or erroneous are both considered as the number of experts is increased.     

Comparative Risk Sensitivity with Reference-Dependent Preferences

Experimental evidence suggests that individuals are risk averse over gains and risk seeking over losses (i.e., they have S-shaped utility functions in an expected utility setting) and that they are loss averse. Furthermore, the evidence leads to a single definition of S-shaped utility, but it has led to several alternative specifications of loss aversion. This paper characterizes the relations more S-shaped than and more loss averse than for a utility function, and in so doing arrives at a new definition of loss aversion based on average instead of marginal utility.     

Payoff Kinks in Preferences over Lotteries

This paper identifies two distinct types of payoff kinks that can be exhibited by preference functions over monetary lotteries—locally separable vs. locally nonseparable—and illustrates their relationship to the payoff and probability derivatives of such functions. Expected utility and Fréchet differentiable preference functions are found to be incapable of exhibiting locally nonseparable payoff kinks; rank-dependent preference functions are incapable of avoiding them.     

Equivalent decision trees and their associated strategy sets

The purpose of this paper is to examine the structure of individual decisions under uncertainty in extensive (i.e., decision-tree) form at a sufficient level of generality to encompass many traditional as well as novel criteria of general choice under uncertainty. Considerations both of structure and of strategic effect arise. In § 2 we define weak and strong forms of strategic equivalence of decision trees and describe partial-normalization procedures by which all economically defined complete pure strategies may be identified for the decider and for chance. In § 3 we examine characteristics of locally randomized, behavior strategies for the decider as the degree of normalization is varied, and we deduce useful properties of the function which specifies an outcome lottery for each behavior strategy of the decider in conjuction with a deterministic or stochastic selection by Chance. In § 4 we list a wide variety of choice criteria which may be invoked within the framework developed here.     

Minimax,information and ultrapessimism

Discussing the foundations of the minimax principle, Savage (1954) argued that it is utterly untenable for statistics because it is ultrapessimistic when applied to negative income, but claimed that such objection is not relevant when the principle is applied to regret. In this paper I rebut the latter claim. I first present an example where ultrapessimism, as Savage understood it, applies to minimax regret but not to minimax negative income. Then, for a sequential decision problems with two terminal acts and a finite number of states of nature, I give necessary and sufficient conditions for a decision rule to be ultrapessimistic, and show that for every payoff table with at least three states, be it in regret form or not, there exist an experiment such that the minimax rule is ultrapessimistic. I conclude with some more general remarks on information and the value of experimentation for a minimax agent.     

An axiomatic basis of accounting: A structuralist reconstruction

Set-theoretic axiomatizations are given for a model of accounting with double classification, and a general core-model for accounting. The empirical status, and representational role of systems of accounts, as well as the problem of how to assign correct values to the goods accounted, are analyzed in precise terms. A net of special laws based on the core-model is described.     

Comment on Pommerehne et al., “concordia discors: Or: What do economists think?”

Conclusion Why do Pommerehne and associates apparently overlook the point that both their hypothesis and data contain elements which are not compatible? Their findings in fact might be interpreted as contradictory to a human capital explanation for the behavior of their sample of economists. Kuhn (1970) would propose that mainstream economics has provided a set of assumptions to place over these findings that allows a neo-classical interpretation. However, the human capital theory does not address the contradictions in the data they gathered. As Berger and Luchman (1966, pp. 62–63) would conclude, institutionalization may take place in any area of relevant conduct to provide a corresponding canopy of legitimations, stretching over a protective cover of both cognitive and normative interpretation. Once again, the institutionalization of mainstream science has been successful in suppressing alternative assumptions that could explain the data more adequately and with greater consistency.We conclude that the paper by Pommerehne and associates contains shortcomings of theorizing and method. Likewise we conclude that a theoretical formulation which takes into account the normative and therefore the cultural factors of science will provide an explanation of the opinion and behavior of economists more in keeping with their empirical findings than one based on self-interest alone.     

Group decision making under uncertainty a note on the aggregation of “ordinal probabilities”

This paper is a first attempt to study the problem of aggregation of individual ordinal probabilistic beliefs in an Arrowian framework. We exhibit some properties an aggregation rule must fulfil; in particular we prove the existence of a quasi-dictator.     

Friedman's ‘instrumentalism’ and constructive empiricism in economics

This reassessment of the long debate about Friedman's thesis on the pointlessness of testing assumptions in economics shows that Friedman's three famous examples, on which a large part of the credit given to this thesis is based, far from substantiating it, can be used to establish radically opposite conclusions. Furthermore, it is shown that this so-called instrumentalist thesis, when applied by Friedman to economics, is of a quite different nature and raises much more serious problems than the standard instrumentalist thesis devised by some methodologists of physics. To disentangle these ambiguities concerning realism and instrumentalism applied to physics or to economics, this paper refers to Van Fraassen's constructive empiricism, which is helpful in reformulating, in a more satisfactory way, the essentials of Friedman's considerations about empiricism and anti-realism.     

Coherent decision analysis with inseparable probabilities and utilities

This article explores the extent to which a decision maker's probabilities can be measured separately from his/her utilities by observing his/her acceptance of small monetary gambles. Only a partial separation is achieved: the acceptable gambles are partitioned into a set of belief gambles, which reveals probabilities distorted by marginal utilities for money, and a set of preference gambles, which reveals utilities reciprocally distorted by marginal utilities for money. However, the information in these gambles still enables us to solve the decision maker's problem: his/her utility-maximizing decision is the one that avoids arbitrage (i.e., incoherence or Dutch books).     

Substitution of indifferent options at choice nodes and admissibility: a reply to Rabinowicz

Tiebreak rules are necessary for revealing indifference in non- sequential decisions. I focus on a preference relation that satisfies Ordering and fails Independence in the following way. Lotteries a and b are indifferent but the compound lottery 0.5f, 0.5b is strictly preferred to the compound lottery 0.5f, 0.5a. Using tiebreak rules the following is shown here: In sequential decisions when backward induction is applied, a preference like the one just described must alter the preference relation between a and b at certain choice nodes, i.e., indifference between a and b is not stable. Using this result, I answer a question posed by Rabinowicz (1997) concerning admissibility in sequential decisions when indifferent options are substituted at choice nodes.     

The impact of risk attitude,uncertainty and disequilibria on optimal production and inventory

Summary The empirical facts seem to indicate that in real economies the effect of uncertainty tends to decrease production. The limitations of empirical investigations presented should be stressed: they were performed mainly on an aggregate level, they mainly refer to Austrian manufacturing, they rely heavily on questionnaires. Above all empirical investigation will never be able to decide normative questions or to explain the behavior in the general equilibrium. Nevertheless in the short run, given all the rigidities and disequilibria which exist, uncertainty tends to lower optimal production even in absence of risk aversion. Risk aversion becomes important for large, for once-for-all decisions, but it is not the only channel through which uncertainty changes decisions.Technological concavity created by concave marginal revenues or by convex marginal costs, marginal costs of uncertainty in disequilibria model or asymmetric costs of revisions of the preliminary decision are able to bias the decision downward in a real world economy without invokingPaper presented to the 2nd Conference on the Foundations of Risk and Utility (FUR), Venezia, 1984.     

Public Perceptions of Risk and Preference-Based Values of Safety

This article reports the results of two studies aimed at estimating preference-based values of safety in three contexts—namely rail, domestic fires and fires in public places—relative to the corresponding value for roads using matching (or equivalence) questions. In addition, both studies included a variety of questions intended to shed light on respondents' perceptions of risk and attitudes to safety in the various contexts. While the two studies were, to all intents and purposes, identical in the procedure that they employed, the essential difference between them was that the first study took place in late 1998, whereas the second study was carried out in early 2000 in the aftermath of a major rail accident at Ladbroke Grove near London's Paddington station which occurred in October 1999 and in which 29 passengers and 2 train drivers died. In addition, the second study sample was deliberately weighted to contain an above-average proportion of regular rail users. These studies demonstrated how certain factors which have been shown to affect people's perception of risk (see Slovic, P. (1992). In S. Krimsky and D. Golding (eds.), Social Theories of Risk, Westport, CT: Praeger, pp. 117–152) also affected our respondents' priorities over safety programs. The results also showed however, that the impact of these perceptions upon the trade-offs between preventing deaths in different hazard contexts was a good deal less pronounced than has been suggested by the value differentials that are currently implicit—and in some cases, explicit—in public policy making.     

Rush and Procrastination Under Hyperbolic Discounting and Interdependent Activities

We analyze the decision of individuals with time-inconsistent preferences to invest in projects yielding either current costs and future benefits or current benefits and future costs. We show that competition between agents for the same project mitigates the tendency to procrastinate on the first type of activities (i.e. to undertake them too late) and to rush on the second one (i.e. to undertake them too early). Competition can therefore increase the expected welfare of each individual. On the contrary, complementarity of projects exacerbates the tendency to rush and to procrastinate and therefore it can decrease the expected welfare of each individual.