Rationality of Belief. Or: Why Bayesianism is Neither Necessary nor Sufficient for Rationality

Itzhak Gilboa, Andrew Postlewaite and David Schmeidler

No 1484, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Economic theory reduces the concept of rationality to internal consistency. The practice of economics, however, distinguishes between rational and irrational beliefs. There is therefore an interest in a theory of rational beliefs, and of the process by which beliefs are generated and justified. We argue that the Bayesian approach is unsatisfactory for this purpose, for several reasons. First, the Bayesian approach begins with a prior, and models only a very limited form of learning, namely, Bayesian updating. Thus, it is inherently incapable of describing the formation of prior beliefs. Second, there are many situations in which there is not sufficient information for an individual to generate a Bayesian prior. Third, this lack of information is even more acute when we address the beliefs that can be attributed to a society. We hold that one needs to explore other approaches to the representation of information and of beliefs, which may be helpful in describing the formation of Bayesian as well as non-Bayesian beliefs.

Keywords: Bayesianism; rationality; savage axioms (search for similar items in EconPapers)
JEL-codes: B4 D8 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2004-09
New Economics Papers: this item is included in nep-evo and nep-hpe
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Citations: View citations in EconPapers (8)

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