For a community that endorses Bayesian epistemology we have had surprisingly few discussions about the most famous Bayesian contribution to epistemology: the Dutch Book arguments. In this post I present the arguments, but it is far from clear yet what the right way to interpret them is or even if they prove what they set out to. The Dutch Book arguments attempt to justify the Bayesian approach to science and belief; I will also suggest that any successful Dutch Book defense of Bayesianism cannot be disentangled from decision theory. But mostly this post is to introduce people to the argument and to get people thinking about a solution. The literature is scant enough that it is plausible people here could actually make genuine progress, especially since the problem is related to decision theory.^{1}

Bayesianism fits together. Like a well-tailored jacket it feels comfortable and looks good. It's an appealing, functional aesthetic for those with cultivated epistemic taste. But sleekness is not a rigourous justification and so we should ask: why must the rational agent adopt the axioms of probability as conditions for her degrees of belief? Further, why should agents accept the principle conditionalization as a rule of inference? These are the questions the Dutch Book arguments try to answer.

The arguments begin with an assumption about the connection between degrees of belief and willingness to wager. An agent with degree of belief *b* in hypothesis *h *is assumed to be willing to buy wager up to and including $*b* in a unit wager on *h *and sell a unit wager on *h* down to and including $*b.* For example, if my degree of belief that I can drink ten eggnogs without passing out is .3 I am willing to bet $0.30 on the proposition that I can drink the nog without passing out when the stakes of the bet are $1. Call this the Will-to-wager Assumption. As we will see it is problematic.

**The Synchronic Dutch Book Argument**

Now consider what happens if my degree of belief that I can drink the eggnog is .3 and my degree of belief that I will pass out before I finish is .75. Given the Will-to-wager assumption my friend can construct a series of wagers that guarantee I will lose money. My friend could offer me a wager on *b *where I pay $0.30 for $1.00 stakes if I finish the eggnog. He could simultaneously offer me a bet where I pay $0.75 for $1.00 stakes if pass out. Now if I down the eggnog I win $0.70 from the first bet but I lose $0.75 from the second bet, netting me -$0.05. If I pass out I lose the $0.30 from the first bet, but win $0.25 from the second bet, netting me -$0.05. In gambling terminology these lose-lose bets are called a Dutch book. What's cool about this is that violating the axioms of probability is a necessary and sufficient condition for degrees of belief to be susceptible to Dutch books, as in the above example. This is quite easy to see but the reader is welcome to pursue formal proofs: representing degrees of belief with only positive numbers, setting *b(all outcomes)=1, *and making* b* additive makes it impossible to construct a Dutch book. A violation of any axiom allows the sum of all *b* in the sample space* *to be greater than or less than 1, enabling a Dutch book.

**The Diachronic Dutch Book Argument**

What about conditionalization? Why must a rational agent believe *h*1 at *b*(*h*1|*h*2) once she learns *h*2? For this we update the Will-to-wager assumption to have it govern degrees of belief for hypothesis conditional on other hypotheses. An agent with degree of belief *b* in hypothesis *h*1*|h*2* *is assumed to be willing to wager up to and including $*b* in a unit wager on *h*1* *conditional on *h*2*. *This is a wager that is canceled if *h*2 turns out false but pays out if *h*2 turns out true. Say I believe with *b=*0.9 that I will finish ten drinks if we decide to drink cider instead of eggnog. Say I also believe with *b=*0.5 that we will drink cider and 0.5 that we drink eggnog. But say I *don't* update my beliefs according to the principle of conditionalization. Once I learn that we will drink cider my belief that I will finish the drinks is only b=0.7. Given the Will-to-wager assumption I accept the following wagers.

(1) An unconditional wager on *h*2 (that we drink cider not eggnog) that pays $0.20 if *h*2 is true at *b*(*h*2*)=*0.5***$0.20*= *$0.10

(2) A unit wager on *h*1 (finishing ten drinks) conditional on *h*2 that pays $1.00 at *b*(*h*1|*h*2)=0.9*$1.00= $0.90

If *h*2 is false I lose $0.10 on wager (1). If h2 is true I win $0.10. But now I'm looking at all that cider and not feeling so good. I decide that my degree of belief that I will finish those ten ciders is only b=0.7. So my buys from me an unconditional wager (3) on *h*1 that pays $1.00 at *b*(*h*1)=0.7*$1.00=$0.7.

Then we start our drinking. If I finish the cider I gain $0.10 from wager (2) which puts me up $0.20, but then I lose $0.30 on wager (3) and I'm down $0.10 on the day. If I don't finish that cider I win $0.70 from wager (3) which puts me at $0.80 until I have to pay out on wager (2) and go down to -$0.10 on the day.

Note again that any update in degree of belief in any hypothesis *h* upon learning evidence *e ***that doesn't equal ***b*(*h*|*e*) is vulnerable to a Diachronic Dutch booking.

**The Will-to-wager Assumption or Just What Does This Prove, Anyway?**

We might want to take the above arguments literally and say they show not treating your degrees of belief like probabilities is liable to lead you into lose-lose wagers. But this would be a very dumb argument: there is no reason for anyone to actually make wagers in this manner. These are wagers which have zero expected gain and which presumably involve transaction costs. **No rational person would make these wagers according to the Will-to-wager assumption.** Second, the argument presented above uses money and as we are all familiar, money has diminishing return. You probably *shouldn't* bet $100 for a one in a million shot at $100,000,000 because a hundred million dollars is probably not a million times more useful than a hundred dollars. Third, the argument assumes a rational person must want to win bets. A person might enjoy the wager even if the odds aren't good or might prefer life without the money.

Nonetheless, the Will-to-wager Assumption doesn't feel arbitrary, it just isn't clear what it implies. There are a couple different strategies we might pursue to improve this argument. First, we can improve the Will-to-wager assumption and corresponding Dutch book theorems by making them about utility instead of money.

We start by defining a utility function, *υ*: *X*→*R* where *X* is the set of outcomes and *R* is the set of real numbers. A rational agent is one that acts to maximize *R *according to their utility function. An agent with degree of belief *b* in hypothesis *h *is assumed to be willing to wager up to and including *b(*util) in a one unil wager on *h. *As a literal ascription of willingness to wager this interpretation still doesn't make sense. But we can think of the wagers here as general stand-ins for decisions made under uncertainty. The Will-to-Wager assumption fails to work when taken literally because in real life we can always decline wagers. But we can take every decision we make as a forced selection of a set of wagers from an imaginary bookie that doesn't charge a vig, pays out in utility whether you live or die. The Bookie sometimes offers a large, perhaps infinite selection of sets of wagers to pick from and sometimes offers only a handful. The agent can choose one and only one set at a time. Agents have little control over what wagers get offered to them but in many cases one set will clearly be better than the others. But the more an agent's treatment of her beliefs diverges from the laws of probability the more often she's going to get bilked by the imaginary bookie. In other words, the key might be to transform the Dutch Book arguments into decision theory problems. These problems would hopefully demonstrate that non-Bayesian reasoning creates a class of decision problem which the agent always answers sub-optimally or inconsistently.^{ 2}

A possible downside to the above strategy is that it leaves rationality entangled with utility. There have been some attempts to rewrite the Dutch Book arguments to remove the aspects of utility and preference embedded in them. The main problem with these strategies is that they tend to either fail to remove all notions of preference^{3} or have to introduce some kind of apparatus that already resembles probability for no particular reason.^{4,5} Our conception of utility is in a Goldilocks spot- it has exactly what we need to make sense of probability while also being something we're familiar with, we don't have to invent it whole cloth. We might also ask a further question: why should beliefs come in degrees. The fact that our utility function (such as humans have one) seems to consist of real numbers and isn't binary (for example) might explain why. You don't need degrees of belief if all but one possible decision are always of value 0. In discussions here many of us have also been given to concluding that probability was epiphenomenal to optimum decision making. Obviously if we believe *that* we're going to *want* a Dutch book argument that includes utility. Moreover, any successful reduction of degrees of belief to some decision theoretic measure would benefit from a set of Dutch book arguments that left out degrees of belief altogether.

As you can see, I think a successful Dutch book will probably keep probability intertwined with decision theory, but since this is our first encounter with the topic: have at it. Use this thread to generate some hypotheses, both for decision theoretic approaches and approaches that leave out utility.

^{1 This post can also be thought of as an introduction to basic material and a post accompanying "What is Bayesianism".}

^{2 I have some more specific ideas for how to do this, but can't well present everything in this post and I'd like to see if others come up with the similar answers. Remember: discuss a problem exhaustively before coming to a conclusion. I hope people will try to work out their own versions, here in the comments or in new posts. It is also interesting to examine what kinds of utility functions can yield Dutch books- consider what happens for example when the utility function is strictly deontological where every decision consists of a 1 for one option and a 0 for all the others. I also worry that some of the novel decision theories suggested here might have some Dutch book issues. In cases like the Sleeping Beauty problem where the payoff structure is underdetermined things get weird. It looks like this is discussed in "When Betting Odds and Credences Come Apart" by Bradley and Leitgeb. I haven't read it yet though.}

^{3 See Howson and Urbach, "Scientific Reasoning, the Bayesian Approach" as an example.}

^{4 Helman, "Bayes and Beyond".}

^{5 For a good summary of these problems see Maher, "Depragmatizing Dutch Book Arguments" where he refutes such attempts. Maher has his own justification for Bayesian Epistemology which isn't a Dutch Book argument (it uses Representation theory, which I don't really understand) and which isn't available online that I can find. This was published in his book "Betting on Theories" which I haven't read yet. This looks pretty important so I've reserved the book, if someone is looking for work to do, dig into this.}

I have a question about Dutch books. If I give you a finite table of probabilities, is there a polynomial time algorithm that will verify that it is or is not Dutch bookable? Or: help me make this question better-posed.

It reminds me of Boolean satisfiability, which is known to be NP complete, but maybe the similarity is superficial.

It's NP-hard. Here's a reduction from the complement problem of 3SAT: let's say you have n clauses of the form (p and not-q and r), i.e., conjunctions of 3 positive or negated atoms. Offer bets on each clause that cost 1 and pay n+1. The whole book is Dutch iff the disjunction of all the clauses is a propositional tautology.

I've written some speculations about what this might mean. The tentative title is "Against the possibility of a formal account of rationality":

http://cs.stanford.edu/people/slingamn/philosophy/against_rationality/against_rationality.pdf

I really like the Less Wrong community's exposition of Bayesianism so I'd be delighted to have feedback!

I'm not very familiar with the literature, but just off the top my head:

It seems to me that the force of 'Dutch book' type arguments can easily be salvaged from criticisms such as these.

OK. Rather than ask the subject whether they would make this wager, ask them, "if you were forced to accept one side ... (read more)

Hm. I'd been meaning to ask about this apparent circularity in the foundations for a bit, and now this tells me the answer is "we don't know yet".

(Specifically: VNM proves the analogue of the "will-to-wager" assumption, but of course it assumes our usual notion of probability. Meanwhile Dutch book argument proves that you need our usual notion of probability - assuming the notion of utility! I guess we can say these at least demonstrate the two are equivalent in some sense. :P )

It seems like building a bet that only a Bayesian system wouldn't get Dutch-booked on might be possible.

[Late night paraphrasing deleted as more misunderstanding/derailing than helpful. Edit left for honesty purposes. Hopeful more useful comment later.]

If you weaken your will-to-wager assumption and effectively allow your agents to offer bid-ask spreads on bets (i'll buy bets on H for x, but sell them for y) then you get "Dutch book like" arguments that show that your beliefs conform to Dempster-Shafer belief functions, or Choquet capacities, depending on what other constraints you allow.

Or, if you allow that the world is non-classical – that the function that decides which propositions are true is not a classical logic valuation function – then you get similar results.

Other arguments for havin... (read more)

I don't share the intuition that our utility function "seems to consist of real numbers". It

seemsto consist of ordinal numbers, at best: this is better than that, which is better than the other. "At best" because it's not even clear that, for two outcomes neither of which I have ranked higher than the other, I'm generally able to say that I'm indifferent between them. Ambivalence is not necessarily indifference.I think we should at least mention that there are other good arguments for why adopting the probability theory is a good idea. For example Cox's theorem.

Rigorous formulation of dutch book arguments:

The dutch book arguments give you probability from utility. What we want to define is:

We choose a function $ from the reals to O (not the othe... (read more)

I wonder if this can stand in for the Maher?

Depragmatized Dutch Book Arguments

How do you design a Dutch book to take advantage of someone whose estimations sum to less than one, instead of more?

Likewise, what does it look like to have negative

b?I'm afraid I don't understand what problem you are trying to solve here. How is what you want to accomplish different from what is done, for example, in Chapter 1 of Myerson?