Standard decision theory and prospect theory: Philosophical considerations regarding theoretical change
Gustavo Marqués () and
Diego Weisman ()
Additional contact information Gustavo Marqués: Centro de Investigaciones en Epistemología de las Ciencias Económicas (CIECE), Facultad de Ciencias Económicas, Universidad de Buenos Aires; Facultad de Ciencias Económicas, Universidad Nacional de Lomas de Zamora. Ciudad de Buenos Aires, Argentina.
Diego Weisman: Centro de Investigaciones en Epistemología de las Ciencias Económicas (CIECE), Facultad de Ciencias Económicas, Universidad de Buenos Aires; Consejo Nacional de Investigaciones Científicas y Técnicas (CONICET). Ciudad Autónoma de Buenos Aires, Argentina.
The paper shows the main problems faced by Expected Utility Theory, focusing on the sort of conceptual change introduced by Prospect Theory and suggesting that it could be characterized as a case of incommensurability in the Kuhnean sense. The impact that the coexistence of two rival visions about decisions under risk could have on economics is also evaluated. It is suggested that conventional decision theory could be the base of standard economics (interpreted as normative economics), while prospective theory can contribute to the development of a more descriptive oriented economics. Some of the philosophical consequences resulting from the theoretical change generated by Prospect Theory are also considered. Particularly, it is examined the proposal of biologic and psychological mechanisms for explaining decision making processes and the search of a broader (substantive) conception of rationality, the issue of methodological individualism and the non-interventionist approach associated with it.