Bayesian Decision Theory

[Chaerophon]

Ok, I've got the theorem now, I think. (I've had to take the requisite stats course for my Poli Sci major, so I see what's going on there, at least mathematically I do...) Thanks to both of you for that. Now, the question is, how to apply it to decisions made under uncertainty. In other words, if an individual A must choose from one of several potential societal models from behind a "veil of ignorance", a position wherein A has no knowledge of their social status, wealth, relative intelligence, etc., how could "Beyesian utility" be a part of their decision process?

What I've got so far from Harsanyi is that the individuals know that their likelihood of being the best or the worst off in society when the "veil drops" is equal to 1/n. (n being = to their relative position). What they don't know is what the relative distribution of wealth will be, i.e. what percent of the people are terribly poor, extremely wealthy, etc... However, since each has an equal probability of obtaining any given relative position in society (1/n), he argues that they will select the societal form that they presume will have the highest "average utility", through an analysis on the basis of "subjective probability". I assume that this means that, in the absence of "objective" knowledge, and the probabilities that go along with it, they "go on a hunch". They assign values to the societal attributes that they subjectively value, and add up the estimated totals for each societal model. The one that scores highest is the one that they go with. The example that he provides is that, since under all societal models, one's probability of returning at a given position is the same, 1/n, the chooser will choose the model with the highest potential reward in terms of average utility. So... Bayes' theorem applies how? That looks like straight up multi-attribute utility analysis... Is the theorem in the motivation for the choosing strategy, itself? I.e., since probability of being, say, worst off, is the same in all models, regardless of one's choice, (Prob 1/n given choice A is the same as prob 1/n given choice B?), one's choice will not be maximally risk-averse, but will be made through a subjective estimation of average utility...?

Hmmm...


Help!!!!