> > This ties in with the hypothesis that many (most? all?) instances of risk > > aversion could be shown to be entirely rational in the maximization of > > expected utility sense if only we knew which utility the human in question > > was maximizing. > > Sorry, but not all risk averse behavior is consistent with expected utility.
> As long as humans have limited computational and cognitive resources, we > will find situations where they don't care enough, are extremely cautious, > or must act quickly, or haven't been sufficiently trained to produce the > "best" choice. Sure, one can find examples where humans make choices without having thought everything through or without making use of the result of such thought. This could be due to any of the reasons cited above - lack of motivation, lack of confidence in the conclusions reached, lack of time, lack of ability... If humans make decisions without using a detailed analysis of the problem, then certainly these decisions will often not be consistent with the choices they would have made if they used such an analysis, or the choices prescribed by expected utility if applied to such an analysis. But saying that such examples are inconsistent with expected utility is a little harsh. Surely here one should be considering the problem where the human is acting under uncertainty, not having performed a detailed analysis of the situation, rather than the problem where such an analysis is available. In the case where the human simply doesn't care enough, one could even include the aversion to thought in the utility function (e.g. many people may be willing to forgo say $100 in order to avoid having to think hard). The issue here is whether, if one knew exactly what was going on inside a person's mind, one would find the mental processes to be consistent with expected utility. It seems to me that this is entirely possible. Of course that would still not make decision theory a good descriptive theory, since in fact we do not know exactly what goes on in people's minds, but it _would_ influence many people's opinions as to its reliability as a prescriptive theory. Konrad
