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 use Bayesian decision theory--and when does it need to be modified? Using a minimum of mathematics, "Rational Decisions" clearly explains the foundations of Bayesian decision theory and shows why Savage restricted the theory's application to small worlds.

The book is a wide-ranging exploration of standard theories of choice and belief under risk and uncertainty. Ken Binmore discusses the various philosophical attitudes related to the nature of probability and offers resolutions to paradoxes believed to hinder further progress. In arguing that the Bayesian approach to knowledge is inadequate in a large world, Binmore proposes an extension to Bayesian decision theory--allowing the idea of a mixed strategy in game theory to be expanded to a larger set of what Binmore refers to as "muddled" strategies.

Written by one of the world's leading game theorists, "Rational Decisions" is the touchstone for anyone needing a concise, accessible, and expert view on Bayesian decision making.

In the wake of 9/11 and Hurricane Katrina, many are asking what, if anything, can be done to prevent large-scale disasters. How is it that we know more about the hazards of modern American life than ever before, yet the nation faces ever-increasing losses from such events? History shows that disasters are not simply random acts. Where is the logic in creating an elaborate set of fire codes for buildings, and then allowing structures like the Twin Towers-tall, impressive, and risky-to go up as design experiments? Why prepare for terrorist attacks above all else when floods, fires, and earthquakes pose far more consistent threats to American life and prosperity? The Disaster Experts takes on these questions, offering historical context for understanding who the experts are that influence these decisions, how they became powerful, and why they are only slightly closer today than a decade ago to protecting the public from disasters. Tracing the intertwined development of disaster expertise, public policy, and urbanization over the past century, historian Scott Gabriel Knowles tells the fascinating story of how this diverse collection of professionals-insurance inspectors, engineers, scientists, journalists, public officials, civil defense planners, and emergency managers-emerged as the authorities on risk and disaster and, in the process, shaped modern America.

This book, based on the author's Clarendon Lectures in Finance, examines the empirical behaviour of corporate default risk. A new and unified statistical methodology for default prediction, based on stochastic intensity modeling, is explained and implemented with data on U.S. public corporations since 1980. Special attention is given to the measurement of correlation of default risk across firms. The underlying work was developed in a series of collaborations over roughly the past decade with Sanjiv Das, Andreas Eckner, Guillaume Horel, Nikunj Kapadia, Leandro Saita, and Ke Wang. Where possible, the content based on methodology has been separated from the substantive empirical findings, in order to provide access to the latter for those less focused on the mathematical foundations. A key finding is that corporate defaults are more clustered in time than would be suggested by their exposure to observable common or correlated risk factors. The methodology allows for hidden sources of default correlation, which are particularly important to include when estimating the likelihood that a portfolio of corporate loans will suffer large default losses. The data also reveal that a substantial amount of power for predicting the default of a corporation can be obtained from the firm's "distance to default," a volatility-adjusted measure of leverage that is the basis of the theoretical models of corporate debt pricing of Black, Scholes, and Merton. The findings are particularly relevant in the aftermath of the financial crisis, which revealed a lack of attention to the proper modelling of correlation of default risk across firms.

In his entertaining and informative book "Graphic Discovery," Howard Wainer unlocked the power of graphical display to make complex problems clear. Now he's back with "Picturing the Uncertain World," a book that explores how graphs can serve as maps to guide us when the information we have is ambiguous or incomplete. Using a visually diverse sampling of graphical display, from heartrending autobiographical displays of genocide in the Kovno ghetto to the "Pie Chart of Mystery" in a "New Yorker" cartoon, Wainer illustrates the many ways graphs can be used--and misused--as we try to make sense of an uncertain world.

"Picturing the Uncertain World" takes readers on an extraordinary graphical adventure, revealing how the visual communication of data offers answers to vexing questions yet also highlights the measure of uncertainty in almost everything we do. Are cancer rates higher or lower in rural communities? How can you know how much money to sock away for retirement when you don't know when you'll die? And where exactly did nineteenth-century novelists get their ideas? These are some of the fascinating questions Wainer invites readers to consider. Along the way he traces the origins and development of graphical display, from William Playfair, who pioneered the use of graphs in the eighteenth century, to instances today where the public has been misled through poorly designed graphs.

We live in a world full of uncertainty, yet it is within our grasp to take its measure. Read "Picturing the Uncertain World" and learn how.

An analogy is a comparison between two things. It points out the similarities between two things that might be different in all other respects. Analogies cause us to think analytically about forms, uses, structures, and relationships. This all-time favorite resource not only gives students a chance to practice solving analogies, but also invites them to open their minds to a completely new way of analyzing the elements of analogies. Each page introduces several categories of analogies. Each category expands students' way of viewing the world and contrasting and comparing elements. Thinking Through Analogies also instills the tools whereby students can create relationships to enhance their creative and formal writing, as well as to heighten their critical thinking in test taking. Other books that teach analogies are Analogies for Beginners and Analogies for the 21st Century. Grades 3-6

""Should We Risk It?" is a timely and unique book. Its 'hands-on' approach to diverse risk problem-solving and decision-making methods fills a long-existing void. Using real-world problems, it introduces basic and more advanced methods in a clear, evenhanded, and thought-provoking manner. The more people who read it--both those already active in risk policy and those with a general interest--the better we as a society will be ready to cope with increasingly complex risk decisions. This book will improve both risk-based decisions and the associated public discourse."--William Ruckelshaus, former Administrator of the U. S. Environmental Protection Agency

"This is a splendid book. It should be of interest to a wide range of students and professionals across the environmental and health sciences."--John Harte, University of California, Berkeley; author of "Consider a Spherical Cow"

"Dan Kammen and David Hassenzahl have filled a long-standing need and have done it brilliantly. Their book provides the bridge between the technical tooks of risk analysis and the real world of health and environmental problems. Mastering the contents of this book should be a requirement for anyone--student or policy maker--who wants to understand risk analysis."--J. Clarence "Terry" Davis, Director, Resources for the Future Center for Risk Management

"The authors have done a remarkable job of showing the common structures underlying the variety of risks that we face in our personal and professional lives. Moreover, their approach allows integrating the diverse forms of knowledge needed to address these complex problems. Readers will think differently after reading this book."--Baruch Fischhoff, Professor of Social and Decision Sciences, Carnegie Mellon University

"This book will be very useful as a text in a risk-analysis class. It will also be a valuable reference for practitioners of risk assessment in industry, government, and consulting. . . . The organization of the book is logical and effective."--James K. Hammitt, Harvard University

What if our ability to make decisions was more a matter of chance than a rational process? It has long been recognized that the mind decides, the body obeys. However, as the author of this book argues, in reality it might just be the opposite. The decision-making process is produced by cerebral matter. It is a random phenomenon that results from competing processes within a network whose architecture has changed little since the first vertebrates. This book presents a 'bottom-up' approach to understanding decision making, starting from the fundamental question: what are the basic properties that a neural network of decision making needs to possess? Combining data drawn from phylogeny and physiology, the book provides a general framework for the neurobiology of decision-making in vertebrates, and explains how it evolved from the lamprey to the apes. It also looks at the consequences of such a framework: how it impacts our capacity for reasoning, and considers some aspects of the pathophysiology of higher brain functions. It ends with an open discussion of more philosophical concepts such as the nature of Free-will. Written in a lively and accessible style, the book presents an exciting perspective on understanding decision making.

A new pragmatic approach, based on the latest developments in argumentation theory, analyzing appeal to expert opinion as a form of argument.

Reliance on authority has always been a common recourse in argumentation, perhaps never more so than today in our highly technological society when knowledge has become so specialized--as manifested, for instance, in the frequent appearance of "expert witnesses" in courtrooms. When is an appeal to the opinion of an expert a reasonable type of argument to make, and when does it become a fallacy? This book provides a method for the evaluation of these appeals in everyday argumentation.

Specialized domains of knowledge such as science, medicine, law, and government policy have gradually taken over as the basis on which many of our rational decisions are made daily. Consequently, appeal to expert opinion in these areas has become a powerful type of argument. Challenging an argument based on expert scientific opinion, for example, has become as difficult as it once was to question religious authority.

Walton stresses that even in cases where expert opinion is divided, the effect of it can still be so powerful that it overwhelms an individual's ability to make a decision based on personal deliberation of what is right or wrong in a given situation. The book identifies the requirements that make an appeal to expert opinion a reasonable or unreasonable argument. Walton's new pragmatic approach analyzes that appeal as a distinctive form of argument, with an accompanying set of appropriate critical questions matching the form. Throughout the book, a historical survey of the key developments in the evolution of the argument from authority, dating from the time of the ancients, is given, and new light is shed on current problems of "junk science" and battles between experts in legal argumentation.

Amazingly, the complexities of voting theory can be explained and resolved with comfortable geometry. A geometry which unifies such seemingly disparate topics as manipulation, monotonicity, and even the apportionment issues of the US Supreme Court. Although directed mainly toward students and others wishing to learn about voting, experts will discover here many previously unpublished results. As an example, a new profile decomposition quickly resolves the age-old controversies of Condorcet and Borda, demonstrates that the rankings of pairwise and other methods differ because they rely on different information, casts serious doubt on the reliability of a Condorcet winner as a standard for the field, makes the famous Arrow's Theorem predictable, and simplifies the construction of examples.

Systems engineering offers a set of capabilities and competencies to design and manage complex systems as they evolve. Drawing from social choice research and systems engineering practice, Making Better Choices examines how we make decisions together and the tools we use to arrive at those decisions. It takes a critical look at the rules and methods we apply to important decisions-from how we run meetings to how we elect presidents-with an interest in how we can improve these mechanisms. By reviewing different voting systems, their original intents, and their deficits, the authors outline a systems engineering approach to making collective choices in society. Written by an economist and an engineer, this groundbreaking work draws from insights in sociology, linguistics, law, political science, philosophy, psychology, economics, and systems design. In an era of relentless rating, this book offers a fresh vision for engineering better democracies by enabling diverse and inclusive choices

This innovative textbook makes the tools and applications of game theory and strategic reasoning both fascinating and easy to understand. Each chapter focuses a specific strategic situation as a way of introducing core concepts informally at first, then more fully, with a minimum of mathematics. At the heart of the book is a diverse collection of strategic scenarios, not only from business and politics, but from history, fiction, sports, and everyday life as well. With this approach, students don't just learn clever answers to puzzles, but instead acquire genuine insights into human behaviour. Written for major courses in economics, business, political science, and international relations, this textbook is accessible to students across the undergraduate spectrum.

A global catastrophic risk is one with the potential to wreak death and destruction on a global scale. In human history, wars and plagues have done so on more than one occasion, and misguided ideologies and totalitarian regimes have darkened an entire era or a region. Advances in technology are adding dangers of a new kind. It could happen again.
In Global Catastrophic Risks 25 leading experts look at the gravest risks facing humanity in the 21st century, including asteroid impacts, gamma-ray bursts, Earth-based natural catastrophes, nuclear war, terrorism, global warming, biological weapons, totalitarianism, advanced nanotechnology, general artificial intelligence, and social collapse. The book also addresses over-arching issues - policy responses and methods for predicting and managing catastrophes.
This is invaluable reading for anyone interested in the big issues of our time; for students focusing on science, society, technology, and public policy; and for academics, policy-makers, and professionals working in these acutely important fields.

An original approach to the identification of fallacies focusing on their relationship to human self deception, mental trickery, and manipulation. Introduces the concept of fallacies and details 44 foul ways to win an argument.

A clear understanding of what we know, don't know, and can't know should guide any reasonable approach to managing financial risk, yet the most widely used measure in finance today--Value at Risk, or VaR--reduces these risks to a single number, creating a false sense of security among risk managers, executives, and regulators. This book introduces a more realistic and holistic framework called "KuU"--the "K"nown, the "u"nknown, and the "U"nknowable--that enables one to conceptualize the different kinds of financial risks and design effective strategies for managing them. Bringing together contributions by leaders in finance and economics, this book pushes toward robustifying policies, portfolios, contracts, and organizations to a wide variety of "KuU" risks. Along the way, the strengths and "limitations" of "quantitative" risk management are revealed.

In addition to the editors, the contributors are Ashok Bardhan, Dan Borge, Charles N. Bralver, Riccardo Colacito, Robert H. Edelstein, Robert F. Engle, Charles A. E. Goodhart, Clive W. J. Granger, Paul R. Kleindorfer, Donald L. Kohn, Howard Kunreuther, Andrew Kuritzkes, Robert H. Litzenberger, Benoit B. Mandelbrot, David M. Modest, Alex Muermann, Mark V. Pauly, Til Schuermann, Kenneth E. Scott, Nassim Nicholas Taleb, and Richard J. Zeckhauser.Introduces a new risk-management paradigm Features contributions by leaders in finance and economics Demonstrates how "killer risks" are often more economic than statistical, and crucially linked to incentives Shows how to invest and design policies amid financial uncertainty