Workbook Edits for “Making Good Decisions”: Author Profile: Leonard Jimmie Savage for Volume 1 – Part I: Our Shared Humanity
For new readers, please read the “Pinned Post” titled Why Use Public Peer-Review to Write a Book? - “See for Yourself”.
For returning readers and subscribers, this post presents the Author Profile for Leonard Jimmie Savage from the workbook for Vol. 1 – Part I: Our Shared Humanity.
- See below the downloadable pdf file for this two-page section, as well as a summary description of the section.
Volume 1 – Part I: Author Profile: Leonard Jimmie Savage (1917-1971)
- Author profiles use the summary version of the Template for Reading Research Papers (See workbook for Volume 1 – Part V) to present the history, and meaning of the life and work of key authors selected from the more than 140 authors mentioned in Volume 1 – Part I: Our Shared Humanity.
This Author Profile present the life and work of Leonard Jimmie Savage (1917-1971). Like Kurt Gödel’s focus on the foundations of Logic, Leonard J. Savage focused on the foundations of probabilities that he saw as “Tools” shaped by the history of their application. Savage focused on the mathematical treatment of inductive inference, in contrast to Godel’s focus on the mathematical treatment of deductive logic. Savage made the distinction between: (i) Objectivist probabilities (The classical, Frequentists view based on repeatable games of chance), (ii) Personalistic probabilities (Individual confidence in certain outcomes), and (iii) Necessary probabilities (related to Logic). Savage created the terms “Small Worlds”, and contrasted the states of “Small Worlds” with the “Grand World”. He insisted that “Small Worlds” tools should be limited to well defined and isolated decision problems, and not extended to the ill-defined problems of the “Grand World”. Note: These workbooks use John Kay’s term of “Large World” instead of Savage’s “Grand World”.
In their 1996 book, Elton G. McGoun, and his co-author George M. Frankfurter extend Savage’s foundational types of probabilities from three to five to articulate the consequences of using “Small Worlds” tools and probability assumptions in the “Large World” in general, and finance in particular where the use of rational, Frequentist probabilities leads to the following four, frequently unexamined assumptions: (i) Cause-Effect mechanisms exist, and can be computed for purposes of “Predictions”, control, problem-solving, and explanation, (ii) Free-will can be ignored, and human behavior can be inferred from population statistics, (iii) Complex situations can be modeled from simple parts, and mathematical formalizations, and (iv) The objective of rational wealth maximization as a shared human behavior connects the various models, and theories.
Thus, McGoun extends C.K. Ogden’s “Word Magic” to “Number Magic”: The thought-terminating cliches that come from the unexamined use of a language, or a mathematical theory. How many individual, business, or investment decisions have been made with Frequentist “Number Magic” that would have been greatly improved with Savage’s Personalistic “Number Magic”? This opens the door to 21st Century solutions that include Ole Peters’ Ergodicity Economics.
Developing…
”CTRI by Francois Gadenne” writes a business book in three volumes, published serially on Substack for public peer-review. The book connects the dots of life-enhancing practices for the next generation, free of controlling algorithms, based on the lifetime experience of a retirement age entrepreneur, & continuously updated with insights from reading Wealth, Health, & Statistics research papers on behalf of large companies as the co-founder of CTRI.