Risk and Rationality

Lara Buchak
UC Berkeley

Decision theories are theories of practical rationality: they formalize constraints of consistency between rational agents’ ends and the means they take to arrive at them. The orthodox view is that subjective expected utility theory, which dictates that agents maximize expected utility, is the correct normative decision theory; however, this theory severely restricts the attitudes that agents can take towards risk. I argue for an alternative, more permissive, decision theory. In particular, I argue for a theory that permits rational agents to care about “global” properties of actions, such as the value of the worst possible outcome that might result, when deciding which means to take to their ends. I thus argue that the sense in which most actual people are risk averse, long considered a mark of irrationality, is in fact rational.