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How Bayesian Rationality Fails and Critical Rationality Works

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  • Max Albert

    (Justus Liebig University)

Abstract

The paper characterizes Bayesianism and critical rationalism as alternative recipes for judgment and decision making. It evaluates these alternatives against the background of the claim that following the respective recipe promotes the decision maker’s interests. Regarding Bayesian rationality, the claim is rejected, both for large and small worlds. Regarding critical rationality, the claim is accepted. It is argued that the critical-rationalist recipe works because it successfully exploits the laws governing human decision makers’ environment. The Bayesian recipe, however, is “too thin” to serve a decision maker’s interests.

Suggested Citation

  • Max Albert, 2017. "How Bayesian Rationality Fails and Critical Rationality Works," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 34(4), pages 313-341, December.
    • Handle: RePEc:spr:homoec:v:34:y:2017:i:4:d:10.1007_s41412-017-0062-3
    DOI: 10.1007/s41412-017-0062-3
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    References listed on IDEAS

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    1. Wolfgang Spohn, 2017. "Knightian Uncertainty Meets Ranking Theory," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 34(4), pages 293-311, December.
    2. Max Albert & Ronald A. Heiner, 2003. "An Indirect-Evolution Approad to Newcomb's Problem," Homo Oeconomicus, Institute of SocioEconomics, vol. 20, pages 161-194.
    3. Güth, Werner & Kliemt, Hartmut, 2015. "How to cope with (new) uncertainties: A bounded rationality approach," Economics Discussion Papers 2015-46, Kiel Institute for the World Economy (IfW Kiel).
    4. Werner Güth & Hartmut Kliemt, 2017. "How to Cope With (New) Uncertainties—A Bounded Rationality Approach," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 34(4), pages 343-359, December.
    5. Anand, Paul & Pattanaik, Prasanta & Puppe, Clemens (ed.), 2009. "The Handbook of Rational and Social Choice," OUP Catalogue, Oxford University Press, number 9780199290420.
    6. Ken Binmore, 2017. "On the Foundations of Decision Theory," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 34(4), pages 259-273, December.
    7. ., 2006. "Corporate Social Responsibility," Chapters, in: David Alexander Clark (ed.), The Elgar Companion to Development Studies, chapter 16, Edward Elgar Publishing.
    8. Oecd, 2006. "List of correspondents," Nuclear Law Bulletin, OECD Publishing, vol. 2006(1).
    9. Albert, Max, 1999. "Bayesian learning when chaos looms large," Economics Letters, Elsevier, vol. 65(1), pages 1-7, October.
    10. Albert, Max, 1996. "Bayesian learning and expectations formation: Anything goes," Discussion Papers, Series I 284, University of Konstanz, Department of Economics.
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    Cited by:

    1. Max Albert, 2022. "How to Escape from Model Platonism in Economics: Critical Assumptions, Robust Conclusions, and Approximate Explanations," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 39(1), pages 37-68, October.

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    More about this item

    Keywords

    Uncertainty; Rationality; Bayesianism; Critical rationalism;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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