Subjectivity in Inductive Inference

I. GILBOA, L. Samuelson

Theoretical Economics

May 2012, vol. 7, n°2, pp.183-215

Departments: Economics & Decision Sciences, GREGHEC (CNRS)

This paper examines circumstances under which subjectivity enhances the effectiveness of inductive reasoning. We consider agents facing a data-generating process who are characterized by inference rules that may be purely objective (or data-based) or may incorporate subjective considerations. Agents who invoke no subjective considerations are doomed to 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. Inductive inference, simplicity, prediction, learning.