Risk Assessment as Virtue

Abstract

AbstractWe present a critique of decision theory as a normative account of decision making under risk. We claim that decision theory has to be supplemented by virtue. To establish this claim, we show first that decision theory is unable to resolve the well-known St. Petersburg paradox. The St. Petersburg game has infinite expected value and yet seems to be worth much less. We argue that the systematic deviation from apparently rational choice can be justified as an instance of virtue. Understood as virtue, risk assessment is a character trait which enables its possessor to assess risk appropriately in an immediate, non-inferential way. This means that, by contrast with decision theory, virtuous risk assessment requires having appropriate emotions. An emotion is a perception of value. Contrary to common belief, decision situations can be found in real life, e. g. in the assessment of risky technologies, which show the structure of the St. Petersburg game, or rather of the inverted St. Petersburg game, which we introduce. When a decision has to be made about possible but extremely unlikely outcomes with an “infinite” negative value, virtue is needed to avoid an inappropriate assessment by a decision theory that is expected to do too much.KeywordsRisk AversionRational AgentRational ChoiceDecision TheoryMarginal UtilityThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.