For those who think that the only way to determine a person’scomparative beliefs is to look at her preferences, the lack ofuniqueness in Jeffrey’s theory is a big problem. Indeed, thismay be one of the main reasons why economists have largely ignoredJeffrey’s theory. Economists have traditionally been skepticalof any talk of a person’s desires and beliefs that goes beyondwhat can be established by examining the person’s preferences,which they take to be the only attitude that is directly revealed by aperson’s behaviour. For these economists, it is thereforeunwelcome news if we cannot even in principle determine thecomparative beliefs of a rational person by looking at herpreferences. A second argument for preference change is based on the correlationsbetween physiological changes and changes in behaviour. Changes inblood sugar levels, for example, are correlated to feeding behaviour,sexual behaviour varies with hormonal changes, and many behaviouralpatterns change with increasing age (for references and discussion,see Loewenstein 1996).
- Against the temporal neutrality of preferences, some have argued thatthere is no enduring, irreducible entity over time to whom all futureutility can be ascribed; they deny that all parts of one’s future areequally parts of oneself (Parfit 1984).
- This view of welfare has difficulties indealing with misinformed and self-defeating wishes.
- Thus for all doxasticallychanged preference orderings, the preferences over worlds remainidentical.
- Thereis a strong tradition, not least in economic applications, to regardfull ≽-transitivity as a necessary prerequisiteof rationality.
- Furtherinterpretive questions regarding preferences and prospects will beaddressed later, as they arise.
Preference change
It may be the case that an agent chooses Xi underprices Pi and Xj under pricesPj, even though Xi ×Pi ≥ Xj ×Pi and Xj ×Pj ≥ Xi ×Pj. The revealed preference method then elicits Xi≻CXj and Xj≻CXi, which violates asymmetry of strict preference. To avoid thisundesirable conclusion, only those choices are considered that satisfythe Weak Axiom of Revealed Preferences (WARP). It says thatif X is chosen when Y is available, then there canbe no budget set containing both alternatives for which Y ischosen and X is not (see section 3.1).
3 On completeness: Vague beliefs and desires
Although the discussion in the socialsciences often merely distinguishes between ordinal and cardinalpreference measures, it is important to further distinguish betweeninterval and ratio scales among the latter, as these require differentassumptions to hold. An interval scale allows for meaningfulcomparisons of differences (e.g. “43°C is as much hotter than 41°C as 29°C is hotter than 27°C”). In addition, a ratioscale also allows for meaningful comparisons of ratios (e.g. “12m is twiceas long as 6m”). Although there have been some attempts to measurepreferences on a ratio scale (in particular, see Kahneman andTversky’s (1979) Prospect Theory, which requires anatural zero point and thus a ratio scale), most efforts have focussedon measuring preferences on an interval scale.
2 Total and partial preferences
By this ismeant a function f that takes us from a pair⟨p,q⟩ of sentences to a setf(⟨p,q⟩) of pairs ofalternatives (perhaps possible worlds). Then p≽fq holds if and only if A≽B for all ⟨A,B⟩ ∈f(⟨p,q⟩) (Hansson 2001,70-73). There are two fundamental comparative value concepts, namely“better” (strict preference) and “equal in valueto” (indifference) (Halldén 1957, 10). The relations ofpreference and indifference between alternatives are usually denotedby the symbols ≻ and ∼ or alternatively by P and I.
5 Compare and Contrast Non-Time Value-Based Methods and Time Value-Based Methods in Capital Investment Decisions
Can there be rationally justifiable claims that certainintrinsic preferences – i.e. preferences that are notdependent on other preferences – are wrong, or should bechanged? Hume distinguished reasonfrom the passion, and argued “that reason alone can never be amotive to any action of the will; that it can never oppose passion inthe direction of the will” (Treatise, Book II, PartIII, Section III). Humeans often took this distinction between beliefsand desires to imply not only that beliefs alone cannot motivateaction, but also that desires are not open to similar rationalcriticism as beliefs. Therefore, Humeans conclude, preferences canonly be criticised if they are extrinsic – i.e.instrumentally derived from other preferences on the basis of beliefs– or inconsistent. Such criticism of extrinsic preferences wouldseem ultimately to be a criticism of false beliefs, and it could beargued that it is therefore not really criticism of preferences(Broome 1993). Refinement of preferences is usually assumed to result in theperson’s (hypothetical) “rational” or “ideallyconsidered” preferences.
In most applications, the set of consumption alternatives is infinite, and the consumer is unaware of all preferences. For example, one does not have to choose between going on holiday by plane or train. In that case, it is unnecessary to attach a preference order to those alternatives (although it can be nice to dream about what one would do if one won the lottery). However, preference can be interpreted as a hypothetical choice that could be made rather than a conscious state of mind.
Thiscontradicts the claim that preferences exclusively transpire fromchoices. One way to substantiate preferences over alternatives thatone cannot choose between is to ask people what they prefer. Theiranswers can be interpreted as further choice evidence—as verbalor writing behaviour. This interpretation treats theiranswers on a par with all other forms of behaviour.
This approach may be seen as an application ofSimon’s “bounded rationality view” (Simon 1957,196–200). Whether or not it is true by definition, i.e., whether real agentscan fail to satisfy its demands, the EU characterisation ofrationality serves to structure and thus identify an agent’spreference attitudes. The substantial nature of these preferenceattitudes—the small businesses invoice and invoicing software agent’s beliefs and desires—can thenbe examined, perhaps with an eye to transformation or reform. Theorem 4 (Bolker)Let \(\Omega\) be a complete and atomless Boolean algebra ofpropositions, and \(\preceq\) a continuous, transitive and completerelation on \(\Omega \setminus \bot \), that satisfies Averaging andImpartiality.
