Subjectivity in Inductive Inference

Itzhak Gilboa (1, 2) , Larry Samuelson (3)

1 TAU - Tel Aviv University
2 GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC
3 Department of Economics

This paper examines circumstances under which subjectivity enhances the effectiveness of inductive reasoning. We consider a game in which Fate chooses a data generating process and agents are characterized by inference rules that may be purely objective (or data-based) or may incorporate subjective considerations. The basic intuition is that agents who invoke no subjective considerations are doomed to "overfit" the data and therefore engage in ineffective learning. The analysis places no computational or memory limitations on the agents -- the role for subjectivity emerges in the presence of unlimited reasoning powers.

Keywords: induction; simplicity; Bayesian learning; prediction

Domains: Economy and decision science

Itzhak Gilboa, Larry Samuelson. Subjectivity in Inductive Inference. Theoretical Economics, 2012, 7 (2), pp.183-215. ⟨10.3982/TE845⟩. ⟨hal-00489433⟩