Thinking and Deciding

Chapter 10
Normative theory of choice
under uncertainty
All presumptive evidence of felony should be admitted cautiously: for
the law holds, that it is better that ten guilty people escape, than that one
innocent suffer.
William Blackstone (1769)
This chapter begins the discussion of the normative theory of decision making: that
is, the theory of how we should choose among possible actions under ideal conditions.
The best decision, I argue, is the one that best helps us to achieve our goals.
This idea follows directly from the definition of rationality introduced in Chapter 3.
The application of this criterion, however, is not always so clear. Decisions often
involve conflict. There may be conflict between the desirability of an outcome and its
probability: The job at Harvard appeals to Ellen more, but the chances of obtaining
tenure are better at Yale. The conflict may be between goals: The Yale job is better
for her career, but the Boston area is a nicer place to live than New Haven. The goals
involved can be those of different people: The Harvard job is better for Ellen, but
her husband will have a better chance of finding a job in New Haven. How do we
resolve such conflicts?
Normatively, the best answer would depend on the extent to which each consequence
of each option (for example, Harvard or Yale) achieves each goal for each
person. This measure of extent of goal achievement is called utility. Our goals, of
course, are what we want to achieve. The normative model states that we should
try to “maximize total utility,” that is, choose the option that will yield the greatest
total utility. When outcomes are uncertain, we take this uncertainty into account
by multiplying the utility of each outcome by its probability. (We shall consider
the arguments for multiplication later.) This theory of how we should measure and
maximize utility is called utility theory.
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