Mini-Workshop on Attitudes to Risk

At the Edelstein Center, Levi building, room 324, Edmund Safra Campus, Givat Ram, Jerusalem

Monday, 26.03.2018

9:45: Welcome

10:30 – 12:00: Johanna Thoma (LSE), Instrumental Rationality without Separability

12:00 – 14:00: Lunch

14:00 – 15:30: Ryan Doody (HUJI), Risk-taking and Tie-breaking

15:30 – 16:00: Coffee Break

16:00 – 17:30: Patricia Rich (Hamburg), Risk Preferences in Ecological Rationality

Tuesday, 27.03.2018

10:30 – 12:00: Zeev Goldschmidt and Ittay Nissan-Rozen (HUJI), Conditional vs. Unconditional Attitudes to Risk

12:00 – 14:00: Lunch

14:00 – 15:30: H. Orri Stefánsson (Stockholm), Ambiguity Aversion behind the Veil of Ignorance

15:30 – 16:00: Coffee Break

16:00 – 17:30: Richard Bradley (LSE), Aversion to Uncertainty and Inequality in Social Decisions

Attitudes to Risk Mini-Workshop – Abstracts

 Aversion to Uncertainty and Inequality in Social Decisions – Richard Bradley  

In this talk I will consider the question of what attitudes to uncertainty and inequality an impartial observer can consistently hold given the (apparently) mild constraint that the observer’s rankings of distributions of wellbeing being across individuals and states satisfies both stochastic and Pareto dominance. The answer is surprising: the observer’s attitude to inequality must ‘match’ the uncertainty attitude of every individual (hence these cannot differ). For example, inequality neutrality on the part of the impartial observer implies uncertainty neutrality on the part of any individual, and vice versa; inequality aversion to some degree on the part of the impartial observer implies uncertainty aversion to the same degree in the part of any individual; and so on.

 Risk Preferences in Ecological Rationality – Patricia Rich

Abstract: Proponents of Ecological Rationality reject Expected Utility Theory as normative, proposing that people’s choice strategies should instead be judged according to how much “health, wealth and happiness” they produce. It is not clear, however, whether and how agents’ risk preferences can be adequately accounted for within this approach. A pressing concern is that it would deem irrational effective heuristics reflecting the preferences of a risk averse agent – and risk aversion is common. I investigate this issue through a three-part simulation study of heuristics for risky choice which applies an Expected Utility standard and an objective wealth standard before directly testing their relationship. An important asymmetry emerges: EU violations are very costly and should be avoided (contra many skeptics and critics), but avoiding violations is not sufficient for good performance. I advocate a two-step process for choosing heuristics: first an EU test should be used to rule out significantly incoherent heuristics, and then a heuristic should be chosen from this reduced set based on more objective performance data, according to the chooser’s risk preferences and priorities.

Ambiguity aversion behind the veil of ignorance – H. Orri Stefansson

The idea of a veil of ignorance was used by John C. Harsanyi to defend Utilitarianism and by John Rawls to defend the absolute priority of the worst off. In a recent paper, Lara Buchak revives the veil of ignorance argument, and uses it to defend an intermediate position between Harsanyi’s and Rawls’s that she calls Relative Prioritarianism. A weakness in Buchak’s argument, is that she makes the questionable assumption that rational people are insensitivity to ambiguity. Allowing for ambiguity sensitivity behind the veil however supports a version of Egalitarianism, whose logical form is quite different from the theory defended by Buchak. Moreover, it turns out that the veil of ignorance argument neither supports Utilitarianism nor Prioritarianism unless we assume that rational people are insensitive to ambiguity.

Instrumental Rationality without Separability – Johanna Thoma

 This paper argues that instrumental rationality is more permissive than expected utility theory. The most compelling instrumentalist argument in favour of separability, its core requirement, is that agents with non-separable preferences end up badly off by their own lights in some dynamic choice problems. I argue that once we focus on the question of whether agents’ attitudes to uncertain prospects help define their ends in their own right, or instead only assign instrumental value in virtue of the outcomes /they may lead to, we see that the argument must fail. Either attitudes to prospects assign non-instrumental value in their own right, in which case we cannot establish the irrationality of the dynamic choice behaviour of agents with non-separable preferences. Or they don’t, in which case agents with non-separable preferences can avoid the problematic choice behaviour without adopting separable preferences.

Risk-taking and Tie-breaking – Ryan Doody

 When you are indifferent between two options, it’s rationally permissible to take either. One way to decide between two indifferent options is to flip a fair coin, taking the one if it lands heads and the other if it lands tails. Is it rationally permissible to employ such a tie-breaking procedure? Intuitively, yes. However, if you are genuinely risk-averse — in particular, if you adhere to Risk-Weighted Expected Utility Theory (Buchak 2013) and have a strictly convex risk-function — the answer will often be no: the REU of deciding by coin-flip will be lower than the REU of choosing one of the options outright (so long as at least one of the options is a nondegenerate gamble). To what extent, if at all, is this a worry for Risk-Weighted Expected Utility Theory? I argue that this fact adds some additional bite to the well-known worries about diachronic consistency afflicting views, like Risk-Weighted Expected Utility Theory, that violate Independence. And that, while these worries are ultimately surmountable, surmounting them comes at a price.

Conditional vs. Unconditional Attitudes to Risk – Zeev Goldschmidt and Ittay Nissan-Rozen

In this paper we explore several formal and interpretational aspects of the representation of attitudes to risk in Jeffrey’s framework, recently suggested by Bradley and Stefansson in a series of papers. Using the notion of “conditional desires” we make a distinction between pure attitudes to risk (i.e. attitudes to risk that are independent of people’s attitudes to sure outcomes) which are conditional on a certain outcome of a given lottery obtaining and unconditional pure attitudes to risk. We demonstrate how this distinction sheds light on several conceptual as well as empirical issues related to people betting behavior.