Rational Decisions

It is widely held that Bayesian decision theory is the final word on how a rational person should make decisions. However, Leonard Savage—the inventor of Bayesian decision theory—argued that it would be ridiculous to use his theory outside the kind of small world in which it is always possible to "look before you leap." If taken seriously, this view makes Bayesian decision theory inappropriate for the large worlds of scientific discovery and macroeconomic enterprise. When is it correct to u...