The History and Methodology of Expected Utility
The History and Methodology of Expected Utility
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This Element offers an accessible but technically detailed review of expected utility theory (EU), which is a model of individual decision-making under uncertainty that is central for both economics and philosophy. The Element's approach falls between the history of ideas and economic methodology. At the historical level, it reviews EU by following its conceptual evolution from its original formulation in the eighteenth century through its transformations and extensions in the mid-twentieth century to its more recent supersession by post-EU theories such as prospect theory. In reconstructing the history of EU, it focuses on the methodological issues that have accompanied its evolution, such as whether the utility function and the other components of EU correspond to actual mental entities. On many of these issues, no consensus has yet been reached, and in this Element the author offers his view on them.
Reviews & endorsements
‘Short as it is, the book is a little gem. My favourite parts are the chapters on Daniel Bernoulli’s invention (Ch.2) and on the accurate discussion of von Neumann and Morgenstern’s approach (Ch.5). In the former, the reader will find a lively reconstruction of how EU came into existence and, above all, a clear presentation of the fundamental methodological issues that, as just said, were already present and have accompanied the theory’s journey for almost 300 years. In the latter, Moscati repeats what was perhaps the single most important achievement of his previous, larger work - namely, a crystal-clear explanation of what von Neumann and Morgenstern really achieved and how their analysis eventually converted Milton Friedman and Paul Samuelson to a theory that prima facie seemed to bring economics back to cardinal utility.’ Nicola Giocoli, The European Journal of the History of Economic Thought
Product details
- Published: August 2023
- Format: Adobe eBook Reader
- ISBN: 9781009198271
- Length: 0 pages
- Availability: This ISBN is for an eBook version which is distributed on our behalf by a third party.
Table of Contents
- 1. Introduction
- 2. Bernoulli's EU
- 3. Fortunes and misfortunes of Bernoulli's EU
- 4. Von Neumann and Morgenstern's EU: presentation
- 5. Von Neumann and Morgenstern's EU: discussion
- 6. Savage's EU
- 7. Beyond EU: prospect theory
- 8. A very short conclusion
- References.
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