Giocoli, Nicola (2011): From Wald to Savage: homo economicus becomes a Bayesian statistician.

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Abstract
Bayesian rationality is the paradigm of rational behavior in neoclassical economics. A rational agent in an economic model is one who maximizes her subjective expected utility and consistently revises her beliefs according to Bayes’s rule. The paper raises the question of how, when and why this characterization of rationality came to be endorsed by mainstream economists. Though no definitive answer is provided, it is argued that the question is far from trivial and of great historiographic importance. The story begins with Abraham Wald’s behaviorist approach to statistics and culminates with Leonard J. Savage’s elaboration of subjective expected utility theory in his 1954 classic The Foundations of Statistics. It is the latter’s acknowledged fiasco to achieve its planned goal, the reinterpretation of traditional inferential techniques along subjectivist and behaviorist lines, which raises the puzzle of how a failed project in statistics could turn into such a tremendous hit in economics. A couple of tentative answers are also offered, involving the role of the consistency requirement in neoclassical analysis and the impact of the postwar transformation of US business schools.
Item Type:  MPRA Paper 

Original Title:  From Wald to Savage: homo economicus becomes a Bayesian statistician 
Language:  English 
Keywords:  Savage, Wald, rational behavior, Bayesian decision theory, subjective probability, minimax rule, statistical decision functions, neoclassical economics 
Subjects:  B  History of Economic Thought, Methodology, and Heterodox Approaches > B3  History of Economic Thought: Individuals > B31  Individuals B  History of Economic Thought, Methodology, and Heterodox Approaches > B2  History of Economic Thought since 1925 > B21  Microeconomics D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D81  Criteria for DecisionMaking under Risk and Uncertainty 
Item ID:  34117 
Depositing User:  Nicola Giocoli 
Date Deposited:  14. Oct 2011 22:24 
Last Modified:  12. Feb 2013 20:55 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/34117 