Bayesian Decision Theory and Utilitarian Ethics
Abstract
One of the great intellectual achievements of the twentieth century is the Bayesian theory of rational behavior under risk and uncertainty. Many economists, however, are still unaware of how strong the case really is for Bayesian theory, and many more fail to appreciate the far-reaching implications the Bayesian concept of rationality has for ethics and welfare economics. The purpose of this paper is to argue that the Bayesian rationality postulates are absolutely inescapable criteria of rationality for policy decisions; and to point out that these Bayesian rationality postulates, together with a hardly controversial Pareto optimality requirement, entail utilitarian ethics as a matter of mathematical necessity.
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