Decision Making

Author(s): Merrill M. Flood

Source: Management Science, Vol. 1, No. 2 (Jan., 1955), pp. 167-169
Published by: INFORMS
Stable URL: https://www.jstor.org/stable/2627317
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 symposium:
Management Science Today and Tomorrow

DECISION MAKING*

MERRILL M. FLOOD

Columbia University

Economists and psychologists are interested in the theory of human decision

making behavior. So are neurophysiologists and psychoanalysts. So also are
statisticians, game theorists, cyberneticians, information theorists, operations
researchers and many others among the management scientists.
The recent survey article by Ward Edwards (1), on "The Theory of Decision
Making", provides a useful account of the current status of this topic-at least
from the point of view taken by economists and psychologists. Perusal of all
of his 209 references would certainly be adequate to acquaint the newcomer
with a good sample of the relevant published material.
The new Wiley volume on Decision Processes, edited by Thrall, Coombs, and
Davis (2), is a collection of papers on the theoretical and experimental aspects of
decision making, representing many approaches to the problem. Perusal of this
book, and its 'many references, would be adequate to start the newcomer well
on his way toward the already vast scientific and semi-scientific literature on
human decision making.
The trouble is that none of us can yet point his finger confidently toward any
important finding as reasonably acceptable; isolated experimental facts, and
impressive mathematico-logical structures, "yes"-important general truths,
no

Perhaps the most impressive attempt to provide a normative theory for

human decision making has been made by the statistician, as typified by work
such as that presented by Blackwell and Girshick (3) in their recent book on
Theory of Games and Statistical Decisions. Familiarity with the contents of
this very fine book, and its references, is a sufficient test of expertness with the
probability-utility approach to normative decision making theory. L. J. Savage
(4), in his Foundations of Statistics, offers a probability-utility type theory of
decision that shows the close logical connection between any such theory and a
very few plausible assumptions about rational behavior. In fact, if the over-all
normative problem is in some sense necessarily one requiring probabilistic con-
siderations of valuations leading to conscious choices among known classes of
alternatives, then it seems likely that a good many of these interestingly complex

* Delivered, as a symposium paper on "Management Science Today," before the first

national meeting of The Institute of Management Sciences, Oct. 21-22, 1954.

167

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 168 MERRILL M. FLOOD

mathematical findings will have practical importance-as they seem already to

have, for example, in such highly developed areas as statistical quality control
or scientific and industrial experimentation.
On the other hand, the psychiatrist and psychoanalyst apply quite a different
set of theoretical notions in their methods of inducing more rational decision
making behavior. They expose the client to drugs and analysis, rather than to
balance sheets and control charts, and have another fair claim to success in
achieving improved decision making.
One industrial psychiatrist, in a recent meeting of one of our faculty seminars
at Columbia, reported that actions by a corporate board he serves can be pre-
dicted very accurately in terms of expected psychological effects on individual
board members, but not at all well in terms of their own estimates of effects on
corporate profits.
The recent Princeton doctoral dissertation by Marvin Minsky (5) on a mathe-
matical theory of nervous behavior, and various other recent attempts to con-
struct formal models to describe total behavior in neurophysiological terms,
impresses me as representing another aspect of the important trend toward
urification of several scientific disciplines contributing to a better understand-
ing of human decision making. The current work of Walter Pitts (6) and his
colleagues, at the M.I.T. Research Laboratory of Electronics, is yielding
exciting experimental results in connection with mathematically formulated
hypotheses about lower levels of nervous behavior. The C.I.T. lectures in 1952
by John von Neumann (7), on Probabilistic Logics and the Synthesis of Reliable
Organisms from Unreliable Components, can be interpreted equally well to
apply to a human organization, or to a high-speed electronic computer, as to the
biological organisms he discussed. I simply note in passing that results like these
of Minsky, Pitts and von Neumann can be related directly to such recent
stochastic theories of individual learning or group decisioning as those of Bush-
Mosteller (8), Estes (9), Bales-Householder-Flood (10) and others; in particular,
Minsky (5) discusses some of the close connections between his neural theory
and the learning theory of Bush and Mosteller (8).
In summary, I see at least three principal directions in which scientific efforts
are presently concentrated in our search for a good normative decision making
theory: first, selection among alternatives on the basis of statistical evaluation;
second, personal and organizational adjustments on the basis of psychological
evaluation and analysis; and, third, alterations of an as yet unspecified charac-
ter, expected to follow after improved understanding of the inner workings of
complex mechanisms and organisms. Each of these scientific developments has
already contributed greatly to the practice of management, and will undoubt-
edly continue to do so in the future.
In conclusion, I confidently hope and expect that this Institute will be of
help both in unifying and extending scientific efforts toward an acceptable
normative theory of decision making and in hastening effective applications to
practical management problems such as those met in organizational design and
in production control.

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 DECISION MAKING 169

References

1. EDWARDS, WARD, "The Theory of Decision-Making," Psychological Bulletin, V

No. 4, July 1954, pp. 380-417.
2. THRALL, COOMBS, AND DAVIS (Eds.), Decision Processes, John Wiley & Sons, Inc., 1954.
3. BLACKWELL, DAVID AND M. A. GIRSHICK, Theory of Games and Statistical Decisions,
John Wiley & Sons, Inc., 1954.
4. SAVAGE, L. J., The Foundations of Statistics, John Wiley & Sons, Inc., 1954.
5. MINSKY, MARVIN, PH.D. dissertation, Department of Mathematics, Princeton Univer-
sity, 1954.
6. PITTS, WALTER, "Investigations on Synaptic Transmission". In: Cybernetics, Heinz
von Foerster (Ed.), Josiah Macy Jr. Foundation, 1953, pp. 159-166.
7. VON NEUMANN, JOHN, Lectures on Probabilistic Logics and the Synthesis of Reliable
Organisms from Unreliable Components, California Institute of Technology, 1952.
8. BUSH, R. R., AND FREDERICK MOSTELLER, "A Stochastic Model with Applications to
Learning," The Annals of Mathematical Statistics, Vol. 24, No. 4, December 1953.
9. ESTES, W. K., "Toward a Statistical Theory of Learning," Psychological Review, Vol.
57, No. 2, March 1950, pp. 94-107.
10. FLOOD, MERRILL M., "A Stochastic Model for Social Interaction," Transactions of
the New York Academy of Sciences, Ser. II, Vol. 16, No. 4, February 1954, pp. 202-
205.

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