Hostname: page-component-7c8c6479df-hgkh8 Total loading time: 0 Render date: 2024-03-27T19:43:38.528Z Has data issue: false hasContentIssue false

The Failure of Expected-Utility Theory as a Theory of Reason

Published online by Cambridge University Press:  15 October 2009

Jean Hampton
Affiliation:
University of Arizona

Extract

Expected-utility (EU) theory has been a popular and influential theory in philosophy, law, and the social sciences. While its original developers, von Neumann and Morgenstern, presented it as a purely predictive theory useful to the practitioners of economic science, many subsequent theorists, particularly those outside of economics, have come to endorse EU theory as providing us with a representation of reason. But precisely in what sense does EU theory portray reason? And does it do so successfully?

There are two strikingly different answers to these questions in the literature. On the one hand, there is the view of people such as David Gauthier that EU theory is an implementation of the idea that reason's only role is instrumental. On the other hand, there is the view suggested by Leonard Savage (1954/1972; and see Anderson, 1993) that the theory is a “formal” and noninstrumental characterization of our reasoning process.

Type
Essays
Copyright
Copyright © Cambridge University Press 1994

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Allais, Maurice. 1953. “Le comportement de L'homme rationnel devant le risque: Critique des postulats et axioms de l'ecole Americaine.” Econometrica 21:503–46.CrossRefGoogle Scholar
Allais, Maurice. 1979a. “The So-Called Allais Paradox and Rational Decision under Uncertainty.” In Expected Utility Hypothesis and the Allais Paradox, edited by Allais, M. and Hagen, O., pp. 437681. Dordrecht: Reidel.CrossRefGoogle Scholar
Anderson, Elizabeth. 1993. Value in Ethics and Economics. Cambridge, MA: Harvard.Google Scholar
Arrow, Kenneth. 1951. Social Choice and Individual Values. New York: John Wiley.Google Scholar
Baumol, William. 1972. Economic Theory and Operations Analysis. Third ed. Englewood Cliffs, NJ: Prentice-Hall.Google Scholar
Bentham, Jeremy. [1823] 1982. Introduction to the Principles of Morals and Legislation, 1982 edition edited by Burns, J. H. and Hart, H. L. A.. London: Methuen.Google Scholar
Bergstrom, Lars. 1966. The Consequences of Action. Stockholm: Almqvist and Wiksell.Google Scholar
Bernoulli, Daniel. 1738. “Exposition of a New Theory of Measurement of Risk.” Commentarii Academiae Scientiarum Imperialis Petropolitanae 5, transl. Louise Sommer, in Econometrica 22 (1954):23–36. Reprinted in Utility Theory: A Book of Readings, edited by Alfred N. Page, pp. 199–214. London: Wiley, 1968.Google Scholar
Broome, John. 1991a. Weighing Goods. Oxford: Blackwell.Google Scholar
Broome, John. 1991b. “Rationality and the Sure Thing Principle.” In Thoughtful Economic Man: Essays on Rationality, Moral Rules and Benevolence, edited by Meeks, Gay, pp. 74102. Cambridge: Cambridge University Press.Google Scholar
Broome, John. 1993. “Can a Humean be Moderate?” In Value, Welfare and Morality, edited by Frey, R. G. and Morris, Christopher, pp. 5173. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Brink, David. 1989. Moral Realism and the Foundations of Ethics. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Cooter, Robert, and Rappoport, Peter. 1984. “Were the Ordinalists Wrong About Welfare Economics?Journal of Economic Literature XXII(2):507–30.Google Scholar
Diamond, Peter. 1967. “Cardinal Welfare, Individualistic Ethics and Interpersonal Comparisons of Utility.” Journal of Political Economy 75:765–66.CrossRefGoogle Scholar
Dreier, James. 1993. “Structures of Normative Theories.” The Monist 76(1):2240.CrossRefGoogle Scholar
Dreier, James., Forthcoming. “Perspectives on the Normativity of Morality.” Nous.Google Scholar
Ellsberg, Daniel. 1954. “Classic and Current Notions of ‘Measurable Utility.’Economic Journal LXIV:528–56.CrossRefGoogle Scholar
Fishbum, Peter. 1970. Utility Theory for Decision-Making. New York: Wiley.CrossRefGoogle Scholar
Gauthier, David. 1986. Morals by Agreement. Oxford: Oxford University Press.Google Scholar
Hammond, Peter. 1988a. “Consequentialism and the Independence Axiom.” In Risk, Decision and Rationality, edited by Munier, B. R.. Dordrecht: D. Reidel.Google Scholar
Hammond, Peter. 1988b. “Consequentialist Foundations for Expected Utility Theory.” Theory and Decision 25:2578.CrossRefGoogle Scholar
Hampton, Jean. 1990. “Hobbes's Science of Moral Philosophy.” In Knowledge and Politics: Case Studies in the Relationship Between Epistemology and Political Philosophy, edited by Dascal, Marcelo and Gruengard, Ora. Boulder, CO: Westview Press.Google Scholar
Hampton, Jean. Forthcoming. “On Instrumental Rationality.” In Essays in Honor of Kurt Baier, edited by J. Schneewind. Peru, IL: Open Court.Google Scholar
Harman, Gilbert. 1977. The Nature of Morality. New York: OxfordGoogle Scholar
Hume, David. 1888. A Treatise of Human Nature, ed. Selby-Bigge, L. A. edition, revised P. H. Nidditch. Oxford: Oxford University Press.Google Scholar
Hurley, Susan. 1989. Natural Reasons. New York: Oxford University Press.Google Scholar
Jeffrey, Richard. 1965/1983. The Logic of Decision. Chicago: University of Chicago.Google Scholar
Jeffrey, Richard. 1971. “On Interpersonal Utility Theory.” Journal of Philosophy 68.CrossRefGoogle Scholar
Kahneman, Daniel, and Tversky, Amos. 1990. “Rational Choice and the Framing of Decisions.” In The Limits of Rationality, edited by Cook, Karen and Levi, Margaret, pp. 6089. Chicago: University of Chicago Press.Google Scholar
Kreps, David. 1988. Notes on a Theory of Choice. Boulder, CO: Westvievv Press.Google Scholar
Little, M. D. 1984. “Comment.” Journal of Economic Literature XXII(2):1187.Google Scholar
Loomes, Graham, and Sugden, Robert. 1982. “Regret Theory: An Alternative Theory of Rational Choice under Uncertainty.” Economic Journal 92:805–24.CrossRefGoogle Scholar
Loomes, Graham, and Sugden, Robert. 1984. “The Importance of What Might Have Been.” In Progress in Utility and Risk Theory, edited by Hagen, Ole and Westop, Fred, pp. 219–35. Dordrecht: Reidel.CrossRefGoogle Scholar
Luce, R. Duncan, and Raiffa, Howard. 1957/1985. Games and Decisions: Introduction and Critical Survey. New York: Dover.Google Scholar
Machina, Mark. 1981. “Rational Decision Making Versus ‘Rational’ Decision Modelling.” Journal of Mathematical Psychology 24:163–75.CrossRefGoogle Scholar
Machina, Mark. 1991. “Dynamic Consistency and Non-Expected Utility Models of Choice under Uncertainty.” In Foundations of Decision Theory: Issues and Advances, edited by Bacharach, Michael and Hurley, Susan. Oxford: Blackwell.Google Scholar
Mackie, J. L. 1977. Ethics: Inventing Right and Wrong. New York: Penguin.Google Scholar
Macrimmon, Kenneth, and Larrson, Stig. 1979. “Utility Theory: Axioms Versus Paradoxes.” In Expected Utility Theory and the Allais Paradox, edited by Allais, M. and Hagen, Ole, pp. 333409. Dordrecht: Reidel.Google Scholar
Manne, Alan E. 1952. “The Strong Independence Assumption - Gasoline Blends and Probability Mixture.” Econometrica 20:665–68.CrossRefGoogle Scholar
Marshall, Alfred. 1925. Principles of Economics. London: MacMillan.Google Scholar
McClennen, Edward. 1990. Rationality and Dynamic Choice. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Nagel, Thomas. 1970. The Possibility of Altruism. Princeton: Princeton University Press.Google Scholar
Nelson, Alan. 1990. “Are Economic Kinds Natural?Minnesota Studies in the Philosophy of Science 14:102–35.Google Scholar
von Neumann, John, and Morgenstern, Oskar. 1944/1947/1953. Theory of Games and Economic behavior. Princeton: Princeton University Press.Google Scholar
Nozick, Robert. 1993. The Nature of Rationality. Princeton: Princeton University Press.CrossRefGoogle Scholar
Ramsey, Frank. 1931. “Truth and Probability.” In The Foundations of Mathematics and Other Logical Essays, edited by Braithwaite, R. B.. New York: Harcourt, Brace and Co. The same essay exists in modified form in Frank Ramsey, Foundations, edited by D. H. Mellor. London: Routledge and Kegan Paul, 1978.Google Scholar
Samuelson, Paul. 1952. “Probability, Utility and the Independence Axiom.” Econometrica 20(4):670–78.CrossRefGoogle Scholar
Samuelson, Paul. 1966. “Utility, Preferences and Probability.” In Collected Scientific Papers. Volume I, edited by Stiglitz, Joseph, pp. 127–36. Cambridge: MIT Press.Google Scholar
Satz, Debra, and Ferejohn, John. 1994. “Rational Choice and Social Theory.” Journal of Philosophy 91(2):7187.CrossRefGoogle Scholar
Savage, Leonard. 1954/1972. The Foundations of Statistics. Original edition, New York: Wiley and Sons. Revised edition, New York: Dover.Google Scholar
Sen, Amartya. 1977. “Rational Fools: A Critique of the Behavioral Foundations of Economic Theory.” Philosophy and Public Affairs 6:317–44.Google Scholar
Sen, Amartya. 1983. “Evaluator Relativity and Consequential Evaluation.” Philosophy and Public Affairs 12:113–32.Google Scholar
Sen, Amartya. 1985. “Rationality and Uncertainty.” Theory and Decision 19:109–28CrossRefGoogle Scholar
Smart, J. J. C. 1973. In Utilitarianism For and Against (with Bernard Williams). Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Stigler, George, and Becker, Gary. 1990. “De Gustibus Non Disputandum.” In The Limits of Rationality, edited by Cook, Karen and Levi, Margaret, pp. 191221. Chicago: Chicago University Press.Google Scholar
Sugden, Robert. 1991. “Rational Choice: A Survey of Contributions from Economics and Philosophy.” Economic Journal 101(407):751–85.CrossRefGoogle Scholar
Taylor, Charles. 1982. “The Diversity of Goods.” In Utilitarianism and Beyond, edited by Sen, A. and Williams, B., pp. 129–44. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Tversky, Amos. 1967. “Additivity, Utility and Subjective Probability.” Journal of Mathematical Psychology 4(2):175201.CrossRefGoogle Scholar
Tversky, Amos. 1975. “A Critique of Expected Utility Theory: Descriptive and Normative Considerations.” Erkenntnis 9:163–73.Google Scholar
Vallentyne, Peter. 1988. “Teleology, Consequentialism and the Past.” Journal of Value Inquiry 22:89101.CrossRefGoogle Scholar
Weymark, John. 1991. “A Reconsideration of the Harsanyi-Sen Debate on Utilitarianism.” In Interpersonal Comparisons of Well-Being, edited by Elster, Jon and Roemer, John, pp. 255320. New York: Cambridge University Press.CrossRefGoogle Scholar
Williams, Bernard. 1981. “Internal and External Reasons.” In Moral Luck, pp. 101–13. Cambridge: Cambridge University Press.CrossRefGoogle Scholar