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K. G. Binmore
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Rational Decisions (The Gorman Lectures in Economics, 4) Paperback – March 14, 2011

by Ken Binmore (Author)
4.4 4.4 out of 5 stars 16 ratings
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It is widely held that Bayesian decision theory is the final word on how a rational person should make decisions. However, Leonard Savage--the inventor of Bayesian decision theory--argued that it would be ridiculous to use his theory outside the kind of small world in which it is always possible to "look before you leap." If taken seriously, this view makes Bayesian decision theory inappropriate for the large worlds of scientific discovery and macroeconomic enterprise. When is it correct to use Bayesian decision theory--and when does it need to be modified? Using a minimum of mathematics, Rational Decisions clearly explains the foundations of Bayesian decision theory and shows why Savage restricted the theory's application to small worlds.


The book is a wide-ranging exploration of standard theories of choice and belief under risk and uncertainty. Ken Binmore discusses the various philosophical attitudes related to the nature of probability and offers resolutions to paradoxes believed to hinder further progress. In arguing that the Bayesian approach to knowledge is inadequate in a large world, Binmore proposes an extension to Bayesian decision theory--allowing the idea of a mixed strategy in game theory to be expanded to a larger set of what Binmore refers to as "muddled" strategies.


Written by one of the world's leading game theorists, Rational Decisions is the touchstone for anyone needing a concise, accessible, and expert view on Bayesian decision making.

Previous page
  1. Part of series
    The Gorman Lectures in Economics
  2. Print length
    216 pages
  3. Language
    English
  4. Publication date
    March 14, 2011
  5. Dimensions
    6 x 0.54 x 9 inches
  6. ISBN-10
    0691149895
  7. ISBN-13
    978-0691149899
  8. See all details
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Editorial Reviews

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"This short, ambitious book is intended to appeal to the presumed curiosity of economists, statisticians, and philosophers as to what constitutes rationality in scientific induction. Binmore, a game theorist aware of the daunting complexity of his subject matter for nonspecialists, has gone to great pains in making his work accessible, even offering marginal symbols to indicate the substantial portions of the text best avoided by readers lacking the author's appetite for mathematical data." ― Choice

"Rational Decisions contains a wealth of stimulating arguments and thought-provoking claims. It would be an excellent text for an advanced seminar in decision theory, particularly for students with a solid technical background. And no economist, philosopher or political scientist seriously interested in theories of rational decision-making can afford to ignore Binmore's controversial and iconoclastic claims."---José Luis Bermúdez, Economics and Philosophy

"[T]he book constitutes an interesting contribution to this area of research rewarding for philosophers, economists, psychologists, and mathematicians alike."---Reinhard Slick, Mathematical Reviews

"It is an original and stimulating book. I enjoyed it very much, and expect that you may too."---Brian Skyrms, British Journal for Philosophy of Science

Review

"Ken Binmore is one of our deepest thinkers on the foundations of economics and game theory. Here he gives us his personal take on standard decision theory and his own extension of the theory to the case in which decision makers cannot assign unambiguous probabilities to future events. This book will be of considerable interest to economists and philosophers alike."―Eric Maskin, Nobel Prize-winning economist

"Strong on ideas and opinions but low on jargon, this is one of the most lively discussions of the strengths and limitations of the Bayesian approach to decision making that I have ever come across. Clearly and strongly argued, controversial, and a pleasure to read."―Riccardo Rebonato, author of The Plight of the Fortune Tellers

"Ken Binmore's new book on rational decisions is a superb up-to-date introduction to the now large and complex literature of this subject. The touch is light, but the examples and theorems are precise. The references are more than ample to lead the reader to more details on those parts of the subject that are of most interest. Although the author is an economist, the content will appeal to philosophers, psychologists, and statisticians as well."―Patrick Suppes, Stanford University

"Well-written, with many nice illustrative examples, this book contributes to the ongoing debate on whether the Bayesian method is the proper normative framework for making decisions and updating beliefs. The book is extremely impressive in its breadth of cited references: historical, mathematical, philosophical, and statistical."―Mark Machina, University of California, San Diego

"This book takes the reader from the very beginnings of decision theory through innovative new work, and it is written concisely and clearly enough to make the journey seem effortless. It will be essential reading for decision theorists and economists in general, whether new to the field or old hands."―Larry Samuelson, Yale University

Product details

  • Publisher ‏ : ‎ Princeton University Press; Fourth Impression edition (March 14, 2011)
  • Language ‏ : ‎ English
  • Paperback ‏ : ‎ 216 pages
  • ISBN-10 ‏ : ‎ 0691149895
  • ISBN-13 ‏ : ‎ 978-0691149899
  • Item Weight ‏ : ‎ 0.988 ounces
  • Dimensions ‏ : ‎ 6 x 0.54 x 9 inches
  • Customer Reviews:
    4.4 4.4 out of 5 stars 16 ratings

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K. G. Binmore

K. G. Binmore

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Customer reviews

4.4 out of 5 stars
4.4 out of 5
16 global ratings

Top reviews from the United States

N N Taleb
5.0 out of 5 stars Must read for the foundations, back to the source, with surprises
Reviewed in the United States on May 13, 2017
Verified Purchase
This is a must read as it presents a comprehensive set of the principles and axioms behind neo-classical economics. Binmore is a mathematician, hence everything is mapped properly, clearly, and thoroughly.
I spent several days in a seminar with Binmore and was surprised to discover, from his arguments, that much of the criticism against the foundations of decision theory are strawman. For the theory doesn't say what people think it says. It may have some problems (such as knowledge of probability and understanding of future payoffs) but not the problems discussed in the behavioral and heterodox literature that appear to be violated by people in their experiments.

Binmore writes the following gem: "Nor does the theory [Revealed Preferences] insist that people are selfish, as its critics mischievously maintain. It has no difficulty in modeling the kind of saintly folk who would sell the shirt off their back rather than see a baby cry".

Binmore doesn't say it explicitly, but hints that even the highly influential critiques of Amartya Sen in "Rational Fools" and elsewhere appear to be a bit strawmannish.

The book is short and dense enough to be a reference.
36 people found this helpful
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Michael Emmett Brady
4.0 out of 5 stars Binmore is completely ignorant of Keynes's lower-upper interval approach to probability
Reviewed in the United States on February 26, 2009
Binmore realizes that the current ,Bayesian decision theory approach,which is a generalization of Jeremy Bentham's approach,based on the claim that all probabilities are subjective, unique,precise,exact,additive single number estimates ,as are all outcomes,has broken down.It can only be applied in Savage's "small " world, as opposed to the real world.On pp. 163-169,he proposes to use a variant of the lower-upper interval approach to probability that he credits to Good as a way of making Bayesianism more relevant and applicable.Binmore argues ,correctly,that Bayesianism can't deal with uncertainty (p.35), as opposed to risk ,or ignorance (p.154).He presents a decent discussion of lower-upper probabilities on pp.88-93,although he has no idea at all that Keynes had already provided a much more broader discussion of such interval estimates in the A T
reatise on Probability.However,we are then treated to the following summary,provided after Binmore categorically dismisses and rejects Keynes's logical approach to probability ,which Keynes firmly anchored to his own modified version of Boole's (The Laws of Thought,1854)original lower -upper probability approach in chapters 15,17,20,22,and 26 of the A Treatise on Probability in 1921 [the reader should note that this material is also in Keynes's 1907 (unsuccessful) and 1908 (successful) Fellowship dissertations done at Cambridge]: "The prevailing orthodoxy in economics is Bayesianism,which I take to be the philosophical position that Bayesian decision theory always applies to all decision problems.In particular,it proceeds as though the subjective probabilities of Savage's theory can be reinterpreted as logical probabilities without any hassle "(Binmore,p.96).Binmore is correct only in the very special case where Keynes's weight of the evidence,w, specified on the unit interval from 0 to 1,is equal to 1.This is the case of linear risk.It means that there is no uncertainty or ignorance facing the decision maker,only risk.Binmore attempted to deal with uncertainty earlier in his book when he went over the Ellsberg Paradox,where Ellsberg's ambiguity would be substituted for Keynes's uncertainty from the GT or Keynes's weight of the evidence,w, from the TP.

In summary,Binmore has successfully reinvented the wheel.His suggested solution is inferior to that first presented by J M Keynes over a 100 years ago.Binmore,of course,is correct.What is amazing is his complete and total ignorance of the work in this area of J M Keynes . Most likely this is due to his accepting at face value two totally preposterous book reviews of Keynes's TP written by the original Bayesian subjectivist,Frank Ramsey.These two book reviews,writtten in 1922 and 1926,respectively,are the source of the prevalent, incorrect claims that Keynes used " non-numerical " probabiities and that these non-numerical probabilities involved no numbers at all except in the few, very special cases where the principle of indifference could be applied.This makes no sense at all today or in 1922 or 1926.
10 people found this helpful
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Patrick
5.0 out of 5 stars It be more gooder.
Reviewed in the United States on December 1, 2019
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It be gooder.
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LVZee
1.0 out of 5 stars Academic Writing at Its Worst
Reviewed in the United States on December 8, 2015
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If I were better at making rational decisions, I would neither have purchased this book, nor wasted my time reading it. Ken Binmore and his heroine Pandora manage to delve into some sort of quest for the hair-splitting mathematical minutiae underlying decision making, especially Bayesian decision making, without coming remotely close to discussing important issues of how one should make rational decisions in the real world. Unless you are a desperate PhD candidate in search of an obscure topic on which you can pontificate, avoid this book.
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Top reviews from other countries

Dem
5.0 out of 5 stars One of the best book you can read about rational decision theory
Reviewed in France on January 23, 2021
Verified Purchase
This book is probably one of the best book you can read about rational decision theory. If you are a graduate student of a PhD candidate in economics, you should really give it a look.
Nevertheless, this book is maybe harsh for undergraduate students, of people with a weak background in math.
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