Expected Utility Theory and Climate Change

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Expected Utility Theory and Climate Change

Type: Master thesis
Title: Expected Utility Theory and Climate Change
Author: Wolring, Lisa
Issue Date: 2017-01-31
Keywords: Frank Ramsey, John Broome, Expected Utility Theory
Abstract: Abstract: This paper investigates whether expected utility theory is a proper method for decision-making given the conditions of uncertainty surrounding climate change. I explain what expected utility theory is and how Ramsey’s theory of partial belief can be used to infer subjective probabilities. By the use of the Allais paradox I show that one of the axioms, namely independence is unlikely to be satisfied. First, it can be the case that when applying expected utility theory one does not assign utilities and probabilities in a consistent manner. Second, I explain that the example of the Allais paradox is part of a broader phenomenon in which what is considered good about an option cannot be reduced to the goodness or badness of individual outcomes of this option. I conclude that expected utility theory is an improper method for decision-making about climate change policy.
Supervisor: Verbeek, Bruno
Faculty: Faculty of Humanities
Department: Philosophy (60 EC) (Master)
Specialisation: PPE
ECTS Credits: 20
Handle: http://hdl.handle.net/1887/46928

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