On expected utility, part 2: Why it can be OK to predictably lose
Hands and Cities, March 18, 2022
Abstract
Dutch Book theorems, Cox’s Theorem, and the Complete Class Theorem aim to justify the subjective probability aspect of expected utility maximization (EUM). Dutch Book theorems argue that violating probability axioms leads to guaranteed losses, while Cox’s Theorem shows that if plausibility assignments obey basic logic and other conditions, they are isomorphic to standard probabilities. The Complete Class Theorem states that policies that maximize expected utility are equivalent to those that are Pareto optimal, implying that if there is a non-dogmatic probability distribution over worlds, EUM can be represented as the maximizing of expected utility relative to that distribution. – AI-generated abstract.
