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fluency in Bayesian reasoning and other forms of statistical competence is a public good that should be a priority in education.
The principles of cognitive psychology suggest that it’s better to work with the rationality people have and enhance it further
(RATIONAL CHOICE AND EXPECTED UTILITY)
Everyone complains about his memory, and no one complains about his judgment.
John von Neumann
theory of what makes choices consistent with the chooser’s values
Commensurability:
Transitivity,
Closure.
The theory of rational choice is a theory of decision making with known unknowns: with risk, not necessarily uncertainty.
Consolidation.
decider faced with a series of risky choices works out the overall risk according to the laws of probability
Independence,
If you prefer A to B, then you also prefer a lottery with A and C as the payouts to a lottery with B and C as the payouts
Consistency: if you prefer A to B, then you prefer a gamble in which you have some chance at getting A, your first choice, and otherwise get B, to the certainty of settling for B.
To meet these criteria for rationality, the decider must assess the value of each outcome on a continuous scale of desirability, multiply by its probability, and add them up, yielding the “expected utility” of that option. (In this context, expected means “on average, in the long run,” not “anticipated,” and utility means “preferable by the lights of the decider,”
A rational chooser is a utility maximizer,
Utility is not the same as self-interest; it’s whatever scale of value a rational decider consistently maximizes.
bounded rationality.
satisfice,
Whether a choice driven by these emotions is “rational” depends on whether you think that emotions are natural responses we should respect, like eating and staying warm, or evolutionary nuisances our rational powers should override.
emotions triggered by possibility and certainty
Prospect theory.
the negative pole, death is not just something that really, really sucks. It’s game over,
with no chance to play again, a singularity that makes all calculations of utility moot.
we do always want to keep our choices consistent with our values. That’s all that the theory of expected utility can deliver, and it’s a consistency we should not take for granted.
suspect there are countless decisions in life where if we did multiply the risks by the
rewards we would choose more wisely.
doesn’t take a lot of math to show that the expected utility of ovarian cancer screening is negative.
How many people have ruined their lives by taking a gamble with a large chance at a small gain and a small chance at a catastrophic loss—
how many lonely singles forgo the small chance of a lifetime of happiness with a soul mate because they think only of the large chance of a tedious coffee with a bore?
for betting your life: Have you ever saved a minute on the road by driving over the speed limit, or indulged your impatience by checking your new texts while crossing the street? If you weighed the benefits against the chance of an accident multiplied by the price you put on your life, which way would it go? And if you don’t think this way, can you call yourself rational?
(SIGNAL DETECTION AND STATISTICAL DECISION THEORY)
The output of statistical decision theory is not a degree of credence but an actionable decision: to have surgery or not, to convict or acquit.
our moral aspirations for justice outstrip our probative powers?
game theory, the analysis of how to make rational choices when the payoffs depend on someone else’s rational choices.
Game theory was presented to the world by von Neumann and Morgenstern in the same book in which they explained expected utility and rational choice.
zero-sum game.
Nash equilibrium,
Volunteer’s Dilemma,
“win–win”—
Rendezvous.
Chicken,
Prisoner’s Dilemma,
Public Goods games.
A correlation is a dependence of the value of one variable on the value of another:
regression,
regression to the mean.
The Winner’s Curse applies to any unusually successful human venture,
“constant conjunction”
