Risky Curves
On the Empirical Failure of Expected Utility
By Daniel Friedman, Duncan James, R. Mark Isaac, Shyam Sunder | Publisher: Taylor and Francis
About the book
For several decades, the orthodox economics approach to understanding choice under risk has been to assume that each individual person maximizes some sort of personal utility function defined over purchasing power. This new volume contests that even the best wisdom from the orthodox theory has not yet been able to do better than supposedly naïve models that use rules of thumb, or that focus on the consumption possibilities and economic constraints facing the individual.
The authors assert this by first revisiting the origins of orthodox theory. They then recount decades of failed attempts to obtain meaningful empirical validation or calibration of the theory. Estimated shapes and parameters of the \"curves\" have varied erratically from domain to domain (e.g., individual choice versus aggregate behavior), from context to context, from one elicitation mechanism to another, and even from the same individual at different time periods, sometimes just minutes apart.
This book proposes the return to a simpler sort of scientific theory of risky choice, one that focuses not upon unobservable curves but rather upon the potentially observable opportunities and constraints facing decision makers. It argues that such an opportunities-based model offers superior possibilities for scientific advancement. At the very least, linear utility – in the presence of constraints - is a useful bar for the \"curved\" alternatives to clear.
Editions of Risky Curves
- EBook
- ISBN 9781317821236
- PDF
- ISBN 9781317821243
Read an Excerpt
For several decades, the orthodox economics approach to understanding choice under risk has been to assume that each individual person maximizes some sort of personal utility function defined over purchasing power. This new volume contests that even the best wisdom from the orthodox theory has not yet been able to do better than supposedly naïve models that use rules of thumb, or that focus on the consumption possibilities and economic constraints facing the individual.
The authors assert this by first revisiting the origins of orthodox theory. They then recount decades of failed attempts to obtain meaningful empirical validation or calibration of the theory. Estimated shapes and parameters of the \"curves\" have varied erratically from domain to domain (e.g., individual choice versus aggregate behavior), from context to context, from one elicitation mechanism to another, and even from the same individual at different time periods, sometimes just minutes apart.
This book proposes the return to a simpler sort of scientific theory of risky choice, one that focuses not upon unobservable curves but rather upon the potentially observable opportunities and constraints facing decision makers. It argues that such an opportunities-based model offers superior possibilities for scientific advancement. At the very least, linear utility – in the presence of constraints - is a useful bar for the \"curved\" alternatives to clear.
Frequently Asked Questions
What is Risky Curves about?
For several decades, the orthodox economics approach to understanding choice under risk has been to assume that each individual person maximizes some sort of personal utility function defined over purchasing power. This new volume contests that even the best wisdom from the orthodox theory has not yet been able to do better than supposedly naïve models that use rules of thumb, or that focus on the consumption possibilities and economic constraints facing the individual.
The authors assert this by first revisiting the origins of orthodox theory. They then recount decades of failed attempts to obtain meaningful empirical validation or calibration of the theory. Estimated shapes and parameters of the \"curves\" have varied erratically from domain to domain (e.g., individual choice versus aggregate behavior), from context to context, from one elicitation mechanism to another, and even from the same individual at different time periods, sometimes just minutes apart.
This book proposes the return to a simpler sort of scientific theory of risky choice, one that focuses not upon unobservable curves but rather upon the potentially observable opportunities and constraints facing decision makers. It argues that such an opportunities-based model offers superior possibilities for scientific advancement. At the very least, linear utility – in the presence of constraints - is a useful bar for the \"curved\" alternatives to clear.
What core themes, tropes, or subjects are explored in Risky Curves?
Economics, Finance, Business and Management > Economics > Economic theory and philosophy
Where can I read a sample of Risky Curves?
You can read an official preview of the few pages here https://www.book2look.com/book/9781317821236
Who is/are the Author/s of the book Risky Curves?
Daniel Friedman, Duncan James, R. Mark Isaac, Shyam Sunder
What are the ISBN numbers for the physical and digital editions?
Risky Curves is available as ebook(ISBN 9781317821236) and pdf(ISBN 9781317821243)