Shackle’s analysis of choice under uncertainty: its strengths, weaknesses and potential synergies with rival approaches

Abstract

Abstract This paper offers a constructively critical examination of George Shackle’s theory of expectations and decision-making under uncertainty, a theory that Shackle developed because he questioned the relevance of objective probabilities as foundations for expectations. His theory is cast in terms of degrees of possibility and potential for surprise associated with disbelief that comes from imagining things that could prevent outcomes from eventuating. His idea that there may be ranges of mutually exclusive “perfectly possible” events has posed a problem for blending his thinking with the subjective probability approach, but here it is argued that this idea is flawed. Shackle’s theory of how expectations are deployed in making choices involves a reference-dependent theory of attention that results in focus on best-case and worst-case pairs of outcomes for each scheme. The paper identifies potential synergies with this idea and prospect theory and explores emotion- and satisficing-based perspectives as well as Shackle’s formal analysis of how focus outcomes are used in ranking rival schemes of action.