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Decision Under Normative uncertainty

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How should we evaluate options when we are uncertain about the correct standard of evaluation, for instance due to conflicting normative intuitions? Such 'normative' uncertainty differs from ordinary 'empirical' uncertainty about an unknown state, and raises new challenges for decision theory and ethics. The most widely discussed proposal is to form the expected value of options, relative to correctness probabilities of competing valuations. We show that the expected-value theory is just one of four natural expectation-based theories. These theories differ in the attitudes to normative risk and to empirical risk. The ordinary expected-value theory imposes neutrality to normative risk, whereas its attitude to empirical risk is impartial, i.e., determined by the risk attitudes of the competing valuations deemed possible. The three other theories are, respectively, neutral to both types of risk; impartial to both types of risk; or neutral to empirical but impartial to normative risk. We conditionally defend the theory which is impartial to all risk - the impartial value theory - on the grounds that it respects risk-attitudinal beliefs rather than imposing an ad-hoc risk attitude. Mean-while, our analysis shows how one can address empirical and normative uncertainty within a unified formal framework, and rigorously define risk attitudes of theories

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  • Franz Dietrich & Brian Jabarian, 2018. "Decision Under Normative uncertainty," Documents de travail du Centre d'Economie de la Sorbonne 18029, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  • Handle: RePEc:mse:cesdoc:18029
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    Cited by:

    1. Zou, Wenbo & Gao, Wenzheng, 2023. "Measuring the welfare and spillover effects of rank information," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 187-220.
    2. Cecchini, Mathilde, 2024. "Into the Unknown - Conceptualizing Citizens' Experiences of Uncertainty in Citizen-state Interactions," OSF Preprints 96pjt, Center for Open Science.

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    Keywords

    empirical uncertainty; normative uncertainty; risk attitude; expected value; impartial value;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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