Standard decision theory and prospect theory: Philosophical considerations regarding theoretical change
The 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.
Volume (Year): 36 (2011)
Issue (Month): 31 (January-june)
|Contact details of provider:|| Postal: |
Phone: +58 74 401111 ext. 1081
Fax: +58 74 401120
Web page: http://iies.faces.ula.ve/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Grether, David M. & Plott, Charles R., .
"Economic Theory of Choice and the Preference Reversal Phenomenon,"
152, California Institute of Technology, Division of the Humanities and Social Sciences.
- Grether, David M & Plott, Charles R, 1979. "Economic Theory of Choice and the Preference Reversal Phenomenon," American Economic Review, American Economic Association, vol. 69(4), pages 623-38, September.
- Daniel Kahneman, 2003. "A Psychological Perspective on Economics," American Economic Review, American Economic Association, vol. 93(2), pages 162-168, May.
- Milton Friedman & L. J. Savage, 1952. "The Expected-Utility Hypothesis and the Measurability of Utility," Journal of Political Economy, University of Chicago Press, vol. 60, pages 463.
- M. Rabin, 2001.
"Incorporating Fairness into Game Theory and Economics,"
Levine's Working Paper Archive
511, David K. Levine.
- Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
- Matthew Rabin., 1992. "Incorporating Fairness into Game Theory and Economics," Economics Working Papers 92-199, University of California at Berkeley.
- Jon Elster, 1998. "Emotions and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 47-74, March.
- Daniel Kahneman & Robert Sugden, 2005. "Experienced Utility as a Standard of Policy Evaluation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(1), pages 161-181, 09.
- Barberis, Nicholas & Thaler, Richard, 2003.
"A survey of behavioral finance,"
Handbook of the Economics of Finance,
in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 18, pages 1053-1128
- Musgrave, Alan, 1981. "'Unreal Assumptions' in Economic Theory: The F-Twist Untwisted," Kyklos, Wiley Blackwell, vol. 34(3), pages 377-87.
- Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, vol. 56, pages 279.
- Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-24, December.
- Elster, Jon, 1996. "Rationality and the Emotions," Economic Journal, Royal Economic Society, vol. 106(438), pages 1386-97, September.
- Loewenstein, George, 1996. "Out of Control: Visceral Influences on Behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(3), pages 272-292, March.
- Hausman,Daniel M., 1992. "The Inexact and Separate Science of Economics," Cambridge Books, Cambridge University Press, number 9780521415019, October.
- Hausman,Daniel M., 1992. "The Inexact and Separate Science of Economics," Cambridge Books, Cambridge University Press, number 9780521425230, October.
- Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages S251-78, October.
When requesting a correction, please mention this item's handle: RePEc:ula:econom:v:36:y:2011:i:31:p:55-83. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alexis Vásquez)
If references are entirely missing, you can add them using this form.