, Volume 71, Issue 2, pp 195-210
Date: 24 Oct 2009

Actualist rationality

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Abstract

This article concerns the prescriptive function of decision analysis. Consider an agent who must choose an action yielding welfare that varies with an unknown state of nature. It is often asserted that such an agent should adhere to consistency axioms which imply that behavior can be represented as maximization of expected utility. However, our agent is not concerned the consistency of his behavior across hypothetical choice sets. He only wants to make a reasonable choice from the choice set that he actually faces. Hence, I reason that prescriptions for decision making should respect actuality. That is, they should promote welfare maximization in the choice problem the agent actually faces. Any choice respecting weak and stochastic dominance is rational from the actualist perspective.

Actualist: One who deals with or considers actually existing facts and conditions, rather than fancies or theories. Webster’s Revised Unabridged Dictionary, 1913 Edition.