Levels of decision analysis

Abstract

In the year 1731, Daniel Bernoulli, a Dutchman educated at the University of Basel, delivered a lecture at a meeting of the St Petersburg Academy of Sciences in Russia, later published as a memoir in the Academy Proceedings (Bernoulli 1738, 1954). Dealing with a seemingly minor and specific problem, in that work he did no less than lay the foundations of what would become analysis of people’s decisions, an undertaking to grow in influence during the next three centuries. Bernoulli’s main idea was simple yet intricate: for an individual, the utility of money and other material resources does not grow in proportion to the amount received, because, as personal wealth increases, one generally becomes less sensitive to any new acquisition.