Problems of normative and descriptive decision theories

Abstract

Abstract In the natural sciences, particularly in the physical sciences, normative theories deal with behavior of matter in idealized environments, such as vacua, frictionless surfaces, infinitely dilute solutions, etc. Thus a direct connection is established between theories of how things would be in idealized situations and how things are in reality. In the social sciences, particularly in economics and its adjoint, decision theory, this connection cannot be made, because real situations do not usually approximate idealized ones. Characteristics of the history of normative decision theory are frequent discoveries of paradoxes, which cannot be simply explained as violations of rationality by decision-makers. The resolution of these paradoxes often entails an enlargement of the repertoire on concepts. Most instructive is the resulting bifurcation of the concept of rationality into ‘individual’ and ‘collective’ rationality, which prescribe different courses of action to a ‘rational’ actor. When decision theory is enriched in this way, the relation between normative and descriptive decision theory can be established on firmer grounds. In particular, an ethical dimension enters decision theory per force.