Choice under uncertainty

The thesis of this paper is that Keynes wrote A Treatise on Probability in opposition to the frequentist theory of probability, systematised by John Venn, which denied any role for probability in decision theory. Keynes was interested in finding an alternative conception of probability that could be utilised as a guide of life. To analyse this point, the paper considers Keynes's criticisms of frequentist tradition in the two versions of his Fellowship dissertation, and in the published edition of his Treatise. Keynes's project is then illustrated with the famous example of whether or not to go out with one's umbrella in the situation in which the pressure is high and the clouds are black.

Two experiments examined the relationships between the knowledge that another person has won in a gamble, the illusion of control and risk taking. Participants played a computer-simulated French roulette game individually. Before playing, some participants learnt that another person won a large amount of money. Results from a first experiment (n = 24) validated a causal model where the knowledge of another person’s win increased the illusion of control, measured with betting times, expectancy and self-reports on scales, which in turn encourages risk taking. In the second experiment (n = 36), some participants were told the previous player acknowledged the win to be fortuitous. The suppression of the belief that the previous winner had himself exerted control over the outcome resulted in lower rates of risk-taking behaviors. This suggests that it was not the knowledge of another person’s win in itself that increased risk taking, but rather, the belief that the other person had some control over the gamble’s outcome. Theoretical implications for the study of social mechanisms involved in gambling behavior are discussed.