Saturday, February 21, 2009

Why we should base our decisions on probabilistic networks

We know from behavioral economics that humans are inherently biased in their decisions.
Basically "the expectations we have in our intuitive system are different than in our reasoning system" (D. Kahneman).
Constructing a probability network enables us to use our reasoning system with the qualitative structure of the influences in our decisions, while leaving the actual inference to the conceptual framework of Bayesian statistics. Because this is were usually our intuitive system kicks in and biases us towards wrong decisions. Because we are build to survive in nature, not to reason about the risk of complex derivative finance products.
Having a probabilistic network documents our decisions and allows a Shewart-cycle of improvements.
We would be able to peer review our decision networks and building up a pattern language of optimal decisions. As Steven Wolfram tried for the natural sciences by collecting algorithmic particles describing nature, we could try to make a executable Wiki of fundamental decision patterns describing recurring decision problems.

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