Foundation of Decision Science

Ron Howard, Stanford University, 1966. Howard, who first coined the term “decision analysis”,  defines decision analysis as “a body of knowledge and professional practice for the logical illumination of decision problems.”  Howard, R.A. (1966). Decision analysis: Applied decision theory. Proceedings of the Fourth International Conference on Operations Research, pp. 55– 71. Wiley-Interscience.

Howard Raiffa, Harvard University, 1968. Raiffa, who wrote the first book on decision analysis, defines it as an approach that “prescribes how an individual faced with a problem of choice under uncertainty should go about choosing a course of action that is consistent with personal basic judgments and preferences.”  Raiffa, H. (1968). Decision Analysis: Introductory Lectures on Choices Under Uncertainty. Reading, MA: Addison-Welsey Publishing Co.

Milton C Weinstein, Harvey V Fineberg, Harvard University, 1980. Decision analysis is a systematic approach to decision making under conditions of uncertainty. Decision analysis is an approach that is (1) explicit, (2) quantitative, and (3) prescriptive. Weinstein MCW et al. Clinical Decision Analysis. W.B. Saunders Company 1980.

Ralph Keeney, Duke University, 1982. Keeney defines decision analysis as “a formalization of common sense for decision problems that are too complex for informal use of common sense,” and more technically as “a philosophy, articulated by a set of logical axioms, and a methodology and collection of systematic procedures, based upon those axioms, for responsibly analyzing the complexities inherent in decision problems.” Keeney, RL. (1982). Decision Analysis: An Overview. Operations Research, Vol. 30, No. 5. (Sep. – Oct., 1982), pp. 803-838. Link.

Clemen and Reilly, 2001. Clemen and Reilly state that “decision analysis provides effective methods for organizing a problem into a structure that can be analyzed. In particular, elements of a decision’s structure include the possible courses of action, the possible outcomes that could result, the likelihood of those outcomes, and eventual consequences (e.g., costs and benefits) to be derived from the different outcomes” (Clemen & Reilly, 2001).

Parnell, Bresnick, Tani, Johnson, 2013. “Decision analysis is a philosophy and a social-technical process to create value for decision makers and stakeholders facing difficult decisions involving multiple stakeholders, multiple (possibly conflicting) objectives, complex alternatives, important uncertainties, and significant consequences. Decision analysis is founded on an axiomatic decision theory and uses insights from the study of decision making.” Parnell, Gregory S.; Bresnick, Terry; Tani, Steven N.; Johnson, Eric R. (2013) Handbook of Decision Analysis (Wiley Handbooks in Operations Research and Management Science). 

Howard Raiffa (1924-2016) had a profound influence on all aspects of the decision sciences and on the fields of systems analysis and operations research. He guided the introduction of the decision sciences into numerous fields such as business, medicine, public health, the environmental sciences, and law, and was instrumental in building world-recognized institutions such as the Kennedy School at Harvard and the International Institute for Applied Systems Analysis near Vienna, Austria.

Learn more. Keeney RL. Remembering Howard Raiffa. Decision Analysis 2016; 13: 213-218. https://doi.org/10.1287/deca.2016.0336.

This article is a thoughtful tribute by Keeney to Raiffa’s remarkable life and accomplishments. Keeney touches on his early life, his service in the army in air traffic control, and his subsequent doctoral degree in mathematics. He provides some personal details and insights that reflect the character and integrity of Raiffa.  Focusing on the influence and impact of his professional career, he discusses his widespread scholarship, impact on practice and policy, and record of teaching and mentorship.

The question of whether people actually make decisions in the ways outlined by von Neumann and Savage was left to psychologists. Ward Edwards was the pioneer, learning about expected utility and Bayesian methods from his Harvard statistics professor and writing a seminal 1954 article titled “The Theory of Decision Making” for a psychology journal. This interest was not immediately embraced by his colleagues—Edwards was dismissed from his first job, at Johns Hopkins, for focusing too much on decision research. But after a stint at an Air Force personnel research center, he landed at the University of Michigan, a burgeoning center of mathematical psychology. Before long he lured Jimmie Savage to Ann Arbor and began designing experiments to measure how well people’s probability judgments followed Savage’s axioms.

A typical Edwards experiment went like this: Subjects were shown two bags of poker chips—one containing 700 red chips and 300 blue chips, and the other the opposite. Subjects took a few chips out of a random bag and then estimated the likelihood that they had the mostly blue bag or the mostly red one. Say you got eight red chips and four blue ones. What’s the likelihood that you had the predominantly red bag? Most people gave an answer between 70% and 80%. According to Bayes’ Theorem, the likelihood is actually 97%. Still, the changes in subjects’ probability assessments were “orderly” and in the correct direction, so Edwards concluded in 1968 that people were “conservative information processors”—not perfectly rational according to the rules of decision analysis, but close enough for most purposes