Choices, Values, and Frames

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Summary: A shocking ignorance of the contributions of JM Keynes
Review: This collection of 42 essays,most of which were first published as articles in academic journals ,demonstrates a shocking amount of ignorance on the part of the essay authors concerning the technical contributions made by J M Keynes to decision theory in his 1921 book,A Treatise on Probability(TP).This is most likely due to the great influence on economists and philosophers of the error filled reviews of the TP made by Frank P Ramsey in 1922 and 1926.Ramsey based his review of the TP primarily on chapters 1-4 of the TP plus several pages taken at random from the other four parts of the TP.Ramsey totally misread and misinterpreted Keynes's initial,elementary discussion of the measurement of probabilities in chapter 3 of the TP.Ramsey misinterpreted the meaning of the terms"nonnumerical" and "nonmeasurable" to mean that Keynes was arguing that it was ,in general,not possible to use numbers to quantify the probability relationship.Thus,Ramsey concluded in both essays that Keynes's nonnumerical probabilities were "mysterious"entities that did not satisfy the probability calculus.Exactly the opposite is the case.Keynes warned the reader of chapter 3 of the TP on p.37 that only after Part II of the TP had been covered would Keynes's approach to quantification be complete.In chapters 15 and 17 ,as well as in chapters 20 and 22,Keynes made it quite clear that by nonnumerical he meant not by a single numeral(number).Thus,it took TWO numerals(numbers)to estimate a probability in general.Keynes is the founder of the interval estimate approach to probability.Thus,nonnumerical is defined explicitly to mean"...between numerical limits."on page 160 of the TP.The reader should note that Keynes emphasized the word "between".Keynes called his approach "inexact numerical APPROXIMATION".Keynes is the founder of the interval estimate approach to probability.A reader of this book,however,might not even know that Keynes ever lived.Keynes is the first scholar in history to specifically define an index,w, to measure the weight of the evidence(what Ellsberg called the ambiguity of the evidence and Savage called the vagueness of the evidence).On p.315 of the TP ,w is defined to lie on the unit interval [0,1].Thus,0<=w<=1.This is 40 years before Ellsberg defined rho on the same unit interval.Keynes developed a decision formula that incorporated variables that allowed a decision maker to include w(or rho)and nonlinear probability preferences(nonadditive sub and super probabilities)into a conventional coefficient of weight and risk,c.The use of the c coefficient solves all of the paradoxes of subjective expected utility theory as well as accounting for all of the effects discussed over the years by Kahneman and Tversky,such as the certainty,reflection,isolation and preference reversal effects.Keynes would certainly agree with essay 11 by M Rabin,titled"Diminishing Marginal Utility of Wealth Cannot Explain Risk Aversion",since this exact conclusion is derived by Keynes on p. 315 of theTP. Despite the glaring ommission of any discussion of Keynes's contributions to decision theory,I still recommend that a specialist buy this book.It contains many valuable articles.

Rating:
Summary: Choices, Values and Frames
Review: A definitive text. Choices, Values and Frames is no casual read but is a first class exposition of the basics in this area of cognitive psychology. I read it from the perspective of a healthcare practitioner trying to understand more about why 'risk' judgements seem so variable and subjective. The insights gained from Choices, Values and Frames have already modified my behaviour.

The only weakness of the text is that it assumes that the reader has reasonable literacy in manipulating abstract mathematical concepts. More exposition would have been appreciated here. However, even if one does not understand the more 'mathematical' sections the book as a whole is still an engaging exposition of how humans process decisions under risk and uncertainty.

A 'must read' for anybody seriously interested in, but unfamiliar with, this area of cognitive psychology

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Summary: The Cutting Edge of Behavioral Decision Theory
Review: Daniel Kahneman and Amos Tversky have spent their whole lives developing an alternative to the "rational actor" model of human decision-making, the standard of traditional economic theory and the decision sciences. Their ideas were received rather well from the start, but in recent years, their alternative, which we can fairly call "behavioral economics" has virtually displaced traditional decision theory as an active research area.

People often think of the Kahneman-Tversky behaviorists as "bomb-throwers" in the sense that they appear to love to destroy traditional concepts of rationality rather that put constructive models in their place. This collection, which consists of 42 very high quality essays by the leading lights of the field, shows clearly that this is not the case. Prospect theory, loss aversion, framing effets, status quo effect, and the like are carefully modeled in this book. I came away quite impressed.

It is a shame that Amos Tversky never lived to see the light of day of this fine volume. It is certainly a vigorous vindication of his lifetime research agenda.

Rating:
Summary: The Cutting Edge of Behavioral Decision Theory
Review: Daniel Kahneman and Amos Tversky have spent their whole lives developing an alternative to the "rational actor" model of human decision-making, the standard of traditional economic theory and the decision sciences. Their ideas were received rather well from the start, but in recent years, their alternative, which we can fairly call "behavioral economics" has virtually displaced traditional decision theory as an active research area.

People often think of the Kahneman-Tversky behaviorists as "bomb-throwers" in the sense that they appear to love to destroy traditional concepts of rationality rather that put constructive models in their place. This collection, which consists of 42 very high quality essays by the leading lights of the field, shows clearly that this is not the case. Prospect theory, loss aversion, framing effets, status quo effect, and the like are carefully modeled in this book. I came away quite impressed.

It is a shame that Amos Tversky never lived to see the light of day of this fine volume. It is certainly a vigorous vindication of his lifetime research agenda.

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Summary: Excellent collection of papers
Review: In a more advanced volume than "Heuristics and Biases," Tverskey et. al. provide another excellent collection of papers that any student/professor/researcher in Behavioral Decision Theory should own.

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Summary: Classic JDM reading
Review: Kahneman and Tversky's compilation of articles in this book is an outstanding exposition of recent advances in cognitive psychology, especially advances associated with prospect theory. The work presented in this volume is largely responsible for the authors being awarded the Nobel Prize (Tversky died before receiving it).

The text is somewhat dense at parts, being aimed at economists and psychologists with some mathematical familiarity. However, the portions of the book that require much mathematics can safely be bypassed without losing much of the substance of the text. This text is the most credible presentation of an alternative theory to the rational actor theory usually assumed in economics. For example, some of the articles help explain the magnitude of the equity return premium, or help show how people make choices differently in similar situations based simply on the way the situation is presented.

I would highly recommend this book to anyone interested in decision making theory, especially as it relates to consumer behavior. It is a brilliant volume that includes the most important articles by the leading mind in the field.

Rating:
Summary: SIGNIFICANT ADVANCES IN ECONOMICS THAT LED TO NOBEL PRIZE
Review: Kahneman and Tversky's compilation of articles in this book is an outstanding exposition of recent advances in cognitive psychology, especially advances associated with prospect theory. The work presented in this volume is largely responsible for the authors being awarded the Nobel Prize (Tversky died before receiving it).

The text is somewhat dense at parts, being aimed at economists and psychologists with some mathematical familiarity. However, the portions of the book that require much mathematics can safely be bypassed without losing much of the substance of the text. This text is the most credible presentation of an alternative theory to the rational actor theory usually assumed in economics. For example, some of the articles help explain the magnitude of the equity return premium, or help show how people make choices differently in similar situations based simply on the way the situation is presented.

I would highly recommend this book to anyone interested in decision making theory, especially as it relates to consumer behavior. It is a brilliant volume that includes the most important articles by the leading mind in the field.

Rating:
Summary: Foundation Work on the Subject
Review: This collection of articles is very good. I found it somewhat redundant in some respects. One might find it useful to read the first chapter and skip to the center chapters that attempt to discuss applications of the different theories, thus learning them 'in the process', rather that individualy before moving forward. The articles form the foundation of this discipline and thus provide an excellent begining for the study of the topic.