Standard decision theory and prospect theory: Philosophical considerations regarding theoretical change
AbstractThe paper shows the main problems faced by Expected Utility Theory, focusing on the sort of conceptual change introduced by Prospect Theory and suggesting that it could be characterized as a case of incommensurability in the Kuhnean sense. The impact that the coexistence of two rival visions about decisions under risk could have on economics is also evaluated. It is suggested that conventional decision theory could be the base of standard economics (interpreted as normative economics), while prospective theory can contribute to the development of a more descriptive oriented economics. Some of the philosophical consequences resulting from the theoretical change generated by Prospect Theory are also considered. Particularly, it is examined the proposal of biologic and psychological mechanisms for explaining decision making processes and the search of a broader (substantive) conception of rationality, the issue of methodological individualism and the non-interventionist approach associated with it.
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Bibliographic InfoArticle provided by Instituto de Investigaciones Económicas y Sociales (IIES). Facultad de Ciencias Económicas y Sociales. Universidad de Los Andes. Mérida, Venezuela in its journal Economía.
Volume (Year): 36 (2011)
Issue (Month): 31 (January-june)
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Postal: Facultad de Ciencias Económicas y Sociales. Instituto de Investigaciones Económicas y Sociales. Campus Universitario Liria, Edificio G, Tercer Nivel. Mérida 5101, Estado Mérida, Venezuela
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Decision theory; theoretical change; prospect theory.;
Find related papers by JEL classification:
- A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
- B00 - Schools of Economic Thought and Methodology - - General - - - History of Economic Thought, Methodology, and Heterodox Approaches
- B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
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