An Essay Concerning Human Decisions

Knowledge Management Initiatives and Strategies in Small and Medium Enterprises

The Nobel Memorial Prize in Economics has been awarded twice so far to researchers in the area of decision making. In 1978 to Herbert Simon “for his pioneering research into the decision-making process within economic organizations” and in 2002 to Daniel Kahneman “for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty”. In spite of this, in business schools and schools of economics courses in decision making focus on decision tools of applied operations research. There are, however, newer views that have not yet made their ways into the decision curricula. Therefore the authors argue that in the Global Village the decision taker's role is wearing off while the decision maker's role is changing. Now, that a great deal of knowledge is available freely and free of charge, a new possibility is opening up for a new type of thinking together. In this Chapter the authors take a clo...

2009

Decision Theory and Rationality Abstract The concept of rationality is a common thread through the human and social sciences-from political science to philosophy, from economics to sociology, from management science to decision analysis. But what counts as rational action and rational behavior? This book explores decision theory as a theory of rationality. Decision theory is the mathematical theory of choice and for many social scientists it makes the concept of rationality mathematically tractable and scientifically legitimate. Yet rationality is a concept with several dimensions and the theory of rationality has different roles to play. It plays an action-guiding role (prescribing what counts as a rational solution of a given decision problem). It plays a normative role (giving us the tools to pass judgment not just on how a decision problem was solved, but also on how it was set up in the first place). And it plays a predictive/explanatory role (telling us how rational agents will behave, or why they did what they did). This controversial but accessible book shows, first, that decision theory cannot play all of these roles simultaneously and, second, that no theory of rationality can play one role without playing the other two. The conclusion is that there is no hope of taking decision theory as a theory of rationality. Book keywords Rationality Decision theory Utility Preference Choice Chapter 1 Decision theory and the dimensions of rationality Abstract This chapter begins by explaining the different explanatory projects underlying the three different dimensions of rationality (action-guiding; normative assessment; and explanatory-predictive). It then introduces the basic elements of decision theory and shows how it can serve as a theory of deliberation. It goes on to explore how, at least ion first appearances, decision theory might be employed in the projects of normative assessment and explanation/prediction. Doing this reveals three basic challenges that decision theory must confront if it is to serve as a theory of rationality. These challenges set the agenda for the main part of the book (Chapters 2 – 4). Chapter 1 keywords Theory of choice Decision-making under risk Decision-making under uncertainty Decision making under certainty Representation theorems Chapter 2 The first challenge: Making sense of utility and preference Abstract This chapter explores how the different dimensions of rationality impose conflicting requirements and constraints upon the central notions of decision theory – the notions of utility and preference. It begins by considering the operational understanding of utility dominant in economics, according to which utility is a measure of preference (as revealed in choice). It goes on to explore different alternatives to the operational understanding. The first alternative is to develop a richer notion of preference (as in Gauthier’s theory of considered preferences). The second alternative is to reject preference as the central notion in decision theory (as in Broome’s analysis of utility in terms of goodness). It turns out that no strategy works for all three of the explanatory projects. Chapter 2 keywords Utility Preference Revealed preference Goodness Chapter 3 The second challenge: Individuating outcomes Abstract Standard presentations of decision theory adopt some version of the invariance principle (that it is irrational to assign different utilities to propositions known to be equivalent). This normative principle raises problems for the idea that decision theory can serve as a theory of motivation. Frederic Schick has responded to this tension by proposing an intensional version of decision theory that allows a single outcome to be understood in different ways (and utilities to be assigned accordingly). This raises problems (such as the failure of the expected utility theorem) that can be dealt with by a more fine-grained way of individuating outcomes (as in Broome’s theory of individuation by justifiers). Again, though, none of these strategies serves all three of the explanatory projects under consideration. Chapter 3 keywords Invariance principle Intensionality Framing effects Substitution axiom (sure-thing principle) Allais paradox Chapter 4 The third challenge: Rationality over time Abstract This chapter explores the challenge of developing decision theory to do justice to the sequential and diachronic nature of decision making. Classical decision theory is governed by a separability principle according to which deliberation at a time is answerable only to the agent’s utility function at that time. This opens the door to forms of sequential inconsistency in which an agent makes a plan and then fails to carry it through in what is often called myopic choice. Decision theorists have proposed a number of ways of dealing with sequential inconsistency. These include models of sophisticated choice, resolute choice, and rational preference change. Each model works for some of the explanatory projects associated with the different dimensions of rationality, but none works for all. Chapter 4 keywords Sequential inconsistency Myopic choice Sophisticated choice Resolute choice Separability principle Substitution axiom (sure-thing principle) Chapter 5 Rationality: Crossing the fault lines? Abstract This chapter explores the relation between the different dimensions of rationality. Previous chapters have argued that decision theory cannot developed in a way that will satisfy the requirements of all three dimensions of rationality. This chapter assess the prospects for taking decision theory to be a theory of rationality in just one of the three dimensions. It evaluates Pettit’s claim that decision theory provides a normative canon of rationality, but not a deliberative calculus of rationality, as well as Kahneman and Tversky’s proposal to use prospect theory as a explanatory-predictive complement to decision theory. The upshot of the chapter is that the three dimensions of rationality cannot be separated out. Chapter 5 keywords Prospect theory Belief-desire law Folk psychology Reasoning heuristics

A teacher, who has a major role in the formation of class culture, needs to have proficiencies to design effective learning environments. The reflection of these proficiencies on classroom practices takes place via the decisions taken under critical situations. This study aims to find out the components underlying teachers' decision-making. Participants of the study which was designed as a case study were elementary school mathematics teachers. The study was carried out through the individual interviews with participants about the decision making under critical situations after analysing participant teachers' course observations which were video-recorded by the researchers. Data obtained from the interviews were analysed through content-analysis method. Based on the findings, it was found that teachers' professional proficiencies could be presented in the same frame with the variables reflected on decision making.

Journal of Behavioral Decision Making, 1995

Focaal, 2013

This article, part of a set of three articles, calls for a critical reexamination of a plethora of phenomena relating to choice and decision making, occasionally addressed by anthropologists, but more regularly studied by economists, political scientists, psychologists, and organization scholars. By means of a bird's-eye research overview, we identify certain weak spots pertaining to a formalistic unicentral view of human rationality, and argue that ethnographic approaches casting light on cultural contexts for thought, reason, and action can explain how choices are framed and constituted from horizons of perceptions and expectations. A positive account of socially and culturally embedded decision making heralds a mode of anthropology with a broad, integrating capacity to address public policy and administration and their interactions with everyday experience and practice.