Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/68915
Authors: 
Albert, Max
Year of Publication: 
1996
Series/Report no.: 
Diskussionsbeiträge: Serie 1, Fakultät für Wirtschaftswissenschaften und Statistik, Universität Konstanz 284
Abstract: 
The paper proves that the Bayesian approach to learning and expectations formation implies no propositions that could conceivably be refuted by observation. For a (non-expanding) universe infinite in time but finite at any point of time, it is shown that by a suitable choice of priors, any betting strategy can be rationalized. Consequently, no sequence of future choices can be excluded on the basis of a decision maker's v. Neumann-Morgenstern utility function, her knowledge of past observations, and the assumption of Bayesian rationality. Since no betting strategy is irrational, Bayesianism is useless as a normative theory as well.
Subjects: 
Bayesianism
Bayesian learning
decision theory
expectations
learning
rational expectations
rationality
rationalizability
subjectively expected utility theory
subjective probability
JEL: 
B41
C11
D81
D83
D84
Document Type: 
Working Paper

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