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HAMMOND, JOHN S., III; KEENEY, RALPH L.; AND RAIFFA, HOWARD 1999, Smart Choices: A Practical Guide to Making Better Decisions, Harvard Business School Publishing, Boston, Massachusetts, 272 pp., $22.50.
In the last 30 years, decision analysis has advanced greatly in both its art and its science. In many respects, Smart Choices reflects the field's maturation. To see how, it is worthwhile comparing Howard Raiffa's [1968] classic Decision Analysis with his new book written with John Hammond and Ralph Keeney. The little white paperback introduced many of us to decision analysis, teaching us how to construct decision trees, calculate the value of sample information, and elicit von Neumann-Morgenstern utility functions. These concepts remain at the core of how decision analysis is taught in most OR/MS or quantitative analysis courses today.
Remarkably, most of these concepts are absent or inconspicuous in Smart Choices. Instead, Hammond, Keeney, and Raiffa promote the "PrOACT" approach to decision making. PrOACT is an acronym for what the authors argue are the five core elements of virtually any decision: problem, objectives, alternatives, consequences, and trade-offs. (PrOACT seems an improvement over [pi]-BRLT; [pi]-BRLT, pronounced "pi-brilt" is a [pi] basic reference lottery ticket. It is used in Raiffa's Decision Analysis as a way of constructing a von Neumann-Morgertstern utility evaluation from an uncertain prospect.) Three other elements-uncertainty, risk tolerance, and linked decisions-complete the eight elements of Smart Choices. The authors devote a chapter to each of these eight elements, intermingling concepts, tips, examples,...