In this paper, a problem for utility theory - that it would have an agent who was compelled to play “Russian Roulette’ with one revolver or another, to pay as much to have a six-shooter with four bullets relieved of one bullet before playing with it, as he would be willing to pay to have a six-shooter with two bullets emptied - is reviewed. A less demanding Bayesian theory is described, that would have an agent maximize expected values of possible (...) total consequence of his actions. And utility theory is located within that theory as valid for agents who satisfy certain formal conditions, that is, for agents who are, in terms of that more general theory, indifferent to certain dimensions of ‘risk’. Raiffa- and Savage-style arguments for its more general validity are then resisted. Addenda are concerned with implications for game theory, and relations between ‘utilities’ and ‘values’. (shrink)

In general, the technical apparatus of decision theory is well developed. It has loads of theorems, and they can be proved from axioms. Many of the theorems are interesting, and useful both from a philosophical and a practical perspective. But decision theory does not have a well agreed upon interpretation. Its technical terms, in particular, ‘utility’ and ‘preference’ do not have a single clear and uncontroversial meaning. How to interpret these terms depends, of course, on what purposes in pursuit of (...) which one wants to put decision theory to use. One might want to use it as a model of economic decision-making, in order to predict the behavior of corporations or of the stock market. In that case, it might be useful to interpret the technical term ‘utility’ as meaning money profit. Decision theory would then be an empirical theory. I want to look into the question of what ‘utility’ could mean, if we want decision theory to function as a theory of practical rationality. I want to know whether it makes good sense to think of practical rationality as fully or even partly accounted for by decision theory. I shall lay my cards on the table: I hope it does make good sense to think of it that way. For, I think, if Humeans are right about practical rationality, then decision theory must play a very large part in their account. And I think Humeanism has very strong attractions. (shrink)

Can the output of human cognition be predicted from the assumption that it is an optimal response to the information-processing demands of the environment? A methodology called rational analysis is described for deriving predictions about cognitive phenomena using optimization assumptions. The predictions flow from the statistical structure of the environment and not the assumed structure of the mind. Bayesian inference is used, assuming that people start with a weak prior model of the world which they integrate with experience to develop (...) stronger models of specific aspects of the world. Cognitive performance maximizes the difference between the expected gain and cost of mental effort. Memory performance can be predicted on the assumption that retrieval seeks a maximal trade-off between the probability of finding the relevant memories and the effort required to do so; in categorization performance there is a similar trade-off between accuracy in predicting object features and the cost of hypothesis formation; in casual inference the trade-off is between accuracy in predicting future events and the cost of hypothesis formation; and in problem solving it is between the probability of achieving goals and the cost of both external and mental problem-solving search. The implemention of these rational prescriptions in neurally plausible architecture is also discussed. (shrink)