Mark D. White

Mark D. White

Barry Schwartz (author of The Paradox of Choice: Why More Is Less), Yakov Ben-Haim, and Cliff Dasco have a paper in the latest issue of Journal for the Theory of Social Behaviour (41/2, June 2011) titled "What Makes a Good Decision? Robust Satisficing as a Normative Standard of Rational Decision Making," in which they recommend robust satisficing as a normative standard for decision-making when facing radical uncertainty (in the sense in which Frank Knight used the term):

In all the research on how heuristics and biases can lead people into bad decisions, the normative standard for comparison has rarely been called into question. However, in this paper, we will argue that many decisions we face cannot be handled by the formal systems that are taken for granted as normatively appropriate. Specifically, the world is a radically uncertain place. This uncertainty makes calculations of expected utility virtually meaningless, even for people who know how to do the calculations. We will illustrate some of the limitations of formal systems designed to maximize utility, and suggest an approach to decision making that handles radical uncertainty—information gaps—more adequately. The arguments below will be normative in intent. They will suggest that “robust satisficing,” not utility maximizing, is often the best decision strategy, not because of the psychological, information processing limitations of human beings (see Simon, 1955, 1956, 1957), but because of the epistemic, information limitations offered by the world in which decisions must be made. (p. 210)

What is robust satisficing?

There is a quite reasonable alternative to utility maximization. It is maximizing the robustness to uncertainty of a satisfactory outcome, or robust satisficing. Robust satisficing is particularly apt when probabilities are not known, or are known imprecisely. The maximizer of utility seeks the answer to a single question: which option provides the highest subjective expected utility. The robust satisficer answers two questions: first, what will be a “good enough” or satisfactory outcome; and second, of the options that will produce a good enough outcome, which one will do so under the widest range of possible future states of the world.