The jurisdiction of the subjective expected utility (SEU) approach to risk-taking in science – A response to Franzoni and Stephan (2023), ‘uncertainty and risk-taking in science’

Abstract

This paper discusses the SEU approach with regard to its “jurisdiction”; i.e. where it should and where it should not be applied. It is argued that the SEU approach must address the fundamental tension between exploration and exploitation; that it should be applied only to disciplines or fields that have low degrees of both technical and strategic uncertainties; and that funders need to prevent the SEU approach from spilling over to evaluations of exploratory projects, for which it is clearly not suited. In addition, the paper argues that the SEU approach needs to respond to the “fund people, not projects” argument. Finally, it calls for many more empirical and preferably experimental studies with the aim of shedding light on how the SEU approach works in practice. In this regard, novel techniques should be used more frequently than today, such as specification curve analysis that encompasses all reasonable explanatory specifications that are both theoretically consistent and statistically valid and non-redundant.