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Sticking with Expected Utility Theory as an Example of "Theory-Induced Blindness"



(p. 286) Perhaps carried away by their enthusiasm, [Rabin and Thaler] . . . concluded their article by recalling the famous Monty Python sketch in which a frustrated customer attempts to return a dead parrot to a pet store. The customer uses a long series of phrases to describe the state of the bird, culminating in "this is an ex-parrot." Rabin and Thaler went on to say that "it is time for economists to recognize that expected utility is an ex-hypothesis." Many economists saw this flippant statement as little short of blasphemy. However, the theory-induced blindness of accepting the utility of wealth as an explanation of attitudes to small losses is a legitimate target for humorous comment.


Source:

Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.

(Note: bracketed names and ellipsis added.)





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