Decision Theory

04 Sep 2022 23:28

Some years ago I was trying to decide whether or not to move to Harvard from Stanford. I had bored my friends silly with endless discussions. Finally, one of them said, "You're one of our leading decision theorists. Maybe you should make a list of costs and benefits and try to roughly calculate your expected utility." Without thinking, I blurted out, "Come on, Sandy, this is serious." --- Persi Diaconis, "The Problem of Thinking Too Much", pp. 36--37

By which I mean the various mathematical theories of optimal decison-making; a division of both statistics and economics. This is a fairly distinct topic from actual human decision-making, since people do not seem to conform very well to any of the theoretical ideals. This sometimes leads to much wailing and gnashing of teeth over our irrationality; if anything, however, it leads me to doubt that these theories are good formalizations of rationality. Nonetheless, they're mathematically interesting, and they do have certain very nice properties in the situations where you can actually get them to work.

See also: Sequential Decision Making Under Stochastic Uncertainty