Expected Utility Maximization Can Capture Your Preferences

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Your preferences actually can be captured by expected utility maximization. But if you have the standard preference, here's sort of how the reasoning goes. The worst I can do in that gamble is get a million dollars. So maybe said in another way, there is a rational way of behaving under which the introduction of even a tiny chance of a super bad outcome weighs very, very heavily in your decision process. And so if you're the kind of person that weighs worse cases heavily, you don't even have to weigh them that heavily. You just have to weighing them sort of more than you weigh best cases.

Life is rich with moments of uncertainty, where we’re not exactly sure what’s going to happen next. We often find ourselves in situations where we have to choose between different kinds of uncertainty; maybe one option is very likely to have a “pretty good” outcome, while another has some probability for “great” and some for “truly awful.” In such circumstances, what’s the rational way to choose? Is it rational to go to great lengths to avoid choices where the worst outcome is very bad? Lara Buchak argues that it is, thereby expanding and generalizing the usual rules of rational choice in conditions of risk.

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Lara Buchak received a Ph.D. in philosophy from Princeton University. She is currently a professor of philosophy at Princeton. Her research interests include decision theory, social choice theory, epistemology, ethics, and the philosophy of religion. She was the inaugural winner of the Alvin Plantinga Prize of the American Philosophical Association. Her book Risk and Rationality proposes a new way of dealing with risk in rational-choice theory.

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