From the Wikipedia page on Decision Theory, General Criticisms A general criticism of decision theory based on a fixed universe of possibilities is that it considers the known unknowns, not the unknown unknowns: it focuses on expected variations, not on unforeseen events, which some argue (as in black swan theory) have outsized impact and must be considered – significant events may be outside model. This line of argument, called the ludic fallacy, is that there are inevitable imperfections in modeling the real world by particular models, and that unquestioning reliance on models blinds one to their limits. Also, in Anti-Fragile, Nassim Taleb tells the story of a decision theory professor who is is making a major life decision. One of her colleagues asks, Why dont you just use decision theory to make this decision? To which, she replies, Because this is serious! Can someone explain what I am missing or give a better criticism of decision theory? I interpret this objection to be: Models are simplifications of reality; and, models rarely account correctly for uncertainty. Therefore, dont use models! In the blog-o-sphere, someone named Aaron B. said, Translated to mechanism, Taleb’s thesis implies that the machinery for estimating subjective probability is incapable of modeling events in the far tails of high-kurtosis reality. Kahneman et al, meanwhile, have a series of experiments which show that people underestimate the probability of low-frequency events and overestimate the probability of high-frequency ones [1]. Loss aversion is a separate effect that describes decisions made among options with known, “objective” probabilities.. There has been a great deal of attention paid these last few years to “decisions from experience,” [2] with a number of studies claiming that loss aversion does not hold up in situations where probabilities must be estimated from sequential experience (such as drawing cards from a deck), and in fact might even show the reverse effect [3]. The jury is still out. Regardless, I think that the claim of dissonance between our stated intended behavior when presented with paper facts and actual operation under sequential uncertainty is one both Taleb and Kahneman should feel comfortable agreeing on.” So... ... is the objection that Decision Theory may cause you more harm then good until you get very good at belief calibration? #Lost #Confused
Posted on: Fri, 22 Aug 2014 21:57:38 +0000