Decision order and time in human affairs

[Front Matter and Table of Contents]: The front matter includes the title page, publication details for the second edition (1969), and a comprehensive table of contents. The book is structured into six parts covering time, uncertainty, ascendancy, expectation of change, economic illustrations, and policy/profit. [Preface to the Second Edition]: Shackle introduces profit as an instigator for radical re-thinking and defines 'decision' as the psychic act of abandoning an old policy for a new one. He discusses the influence of the Stockholm School (Myrdal and Lindahl) on sequence analysis and the integration of uncertainty into Keynesian thought. [Preface to the First Edition]: Shackle outlines the core thesis: decision-making is an originative act of 'inspiration' rather than a passive response to circumstances. He argues against probability in favor of 'potential surprise' and 'possibility' because outcomes are imagined constructs within a 'solitary moment' of actuality. The preface acknowledges a wide range of critics and collaborators across economics, philosophy, and psychology, emphasizing that economics must be studied alongside these other disciplines. [Part I: Time - Chapter I: Decision]: Shackle defines decision as a 'cut' between past and future, representing an act of creation that introduces essential novelty into history. He rejects three assumptions that would render decision-making empty or uninteresting: a predestinate/determinate cosmos, perfect foresight (where choice is mechanical), and unbounded uncertainty (where choice is pointless). Instead, he proposes a model of 'non-empty' decision based on bounded uncertainty, where humans act as sources of unexplainable initiatives and inspired hypotheses rather than merely responding to predetermined rules. [Chapter II: Imagination, Expectation, Anticipation]: This chapter explores the mental processes underlying decision-making, arguing that the consequences relevant to choice are internal experiences rather than external 'real' events. Shackle distinguishes between 'free' imagination (fantasy) and 'expectation,' which is imagination constrained by the decision-maker's judgment of what is possible. He posits that the future does not exist objectively but is a system of rival figments created in the present. 'Anticipation' is defined as the full intensity of imaginative experience that occurs once a specific act has been chosen. [Chapter III: The Solitary Moment]: Shackle introduces the concept of the 'solitary moment' or 'moment in being,' asserting that consciousness and actuality exist only in the present. He distinguishes this from the 'calendar axis,' which is a mental construct used to organize history. A key consequence of this view is the rejection of standard definitions of 'irrational conduct' based on future regret; since actualities at different dates cannot be brought face-to-face for comparison, intertemporal choices are always comparisons of rival imaginations held simultaneously in the present. [Chapter IV: Insulated Dynamic Schemes]: Shackle examines the possibility of a 'dynamics' or predictive science in a world of creative decision. He distinguishes between 'prophecy' (which requires impossible omniscience) and conditional 'insulated dynamics' (which assumes no new decisions are made during the period). He also describes 'inertial dynamics,' which relies on the momentum of established habits. Ultimately, he argues that while exterior dynamics (objective/public) seeks to calculate history, his 'interior dynamics' seeks insight into the mental structure of the creative event itself. [Chapter V: Three Critics]: Shackle responds to critiques from Johan Åkerman, B. S. Keirstead, and L. M. Lachmann. Åkerman questions the link between individual creative decisions and macro-economic structures. Keirstead challenges the distinction between lived time and observed time, particularly regarding the historian's role and personal identity. Lachmann emphasizes the continuity of knowledge and the spread of information. Shackle clarifies that his model does not ignore memory or the interaction between individuals, but insists that the 'new' element in decision remains fundamentally unpredictable and non-determinate. [Chapter VI: Time and Decision in Sum]: A concluding summary of Part I. Shackle reiterates that decision is choice in the face of bounded uncertainty, occurring within a solitary present. He emphasizes that because decisions are creative and inject novelty into history, both decisions and the subsequent course of history are inherently unpredictable. He maintains that while action is non-arbitrary (rational) in relation to the decision-maker's imagined outcomes, the creation of those outcomes themselves involves an element of 'inspiration' that transcends the past. [Uncertainty as Probability]: Shackle distinguishes between distributional and non-distributional uncertainty variables, arguing that probability is a distributional measure requiring a complete list of hypotheses without a 'residual hypothesis'. He critiques the application of actuarial probability to unique, non-divisible, and self-destructive experiments, where the act itself irreversibly changes the conditions of the system. The chapter concludes that while probability constitutes knowledge about a collective of events, it fails as a measure of uncertainty for isolated, crucial human decisions. [Professor Niehans on Probability]: This section reproduces and discusses an article by Professor Jürg Niehans, who supports Shackle's view that every decision is logically unique. Niehans distinguishes between 'frequency-probabilities' (describing groups of experiments) and 'uncertainty-probabilities' (relevant to unique decisions but problematic). He further questions the possibility of scientifically judging the 'rationality' of decision principles when outcomes are influenced by both the principle and the subsequent state of nature. [Uncertainty as Possibility]: Shackle introduces 'potential surprise' as a non-distributional uncertainty variable that measures the degree of possibility or disbelief. Unlike probability, zero potential surprise can be assigned to multiple rival hypotheses simultaneously, representing 'perfect possibility' rather than 'certainty of rightness'. He argues that potential surprise better captures the structure of belief, as it allows an individual to regard both a hypothesis and its contradictory as perfectly possible without logical conflict. [Potential Surprise Axiomatized]: Shackle presents a formal axiomatic system for potential surprise, defining its bounds, its relation to contradictory hypotheses, and the logic of joint potential surprise. He includes revisions to Axiom 7 regarding the potential surprise of simultaneous hypotheses, responding to critiques by Houthakker. The chapter also addresses M. B. Nicholson's dilemma regarding how the increasing number of specified rivals might eventually force a transition from perfect to imperfect possibility. [Critics of Potential Surprise]: This extensive chapter reviews and responds to various critics. C. F. Carter and J. Puthucheary argue that even among 'perfectly possible' outcomes, some are more 'likely' than others. Wilhelm Krelle suggests a mapping between potential surprise and subjective probability, which Shackle rejects as ignoring the non-distributional nature of possibility. Logician C. L. Hamblin supports Shackle's 'plausibility' logic as a non-metrical alternative to probability, particularly in 'open systems' like innovation where contingencies cannot be enumerated. Finally, Stanley Stark contrasts Shackle's 'temporal foresight' with Herbert Simon's 'atemporal' closed systems. [A Counter-Critique on Probability]: Shackle examines Richard S. Weckstein's categorization of probability concepts (frequency, logical, and subjective). He critiques Reichenbach's 'posit' theory, which attempts to justify applying class probabilities to single cases by claiming it maximizes success in the long run. Shackle argues that this fails for crucial, non-repeatable decisions and maintains that the formal requirement for probabilities to sum to unity is an inescapable constraint that potential surprise successfully avoids. [Uncertainty in Sum]: A summary of Part II, restating the fundamental choice between distributional (probability) and non-distributional (potential surprise) variables. Shackle reiterates that probability is ill-suited for non-divisible experiments because it forces a reduction in the status of a hypothesis simply because more rivals are considered. Potential surprise, as a measure of disbelief, allows the individual to spread the 'net of non-surprising hypotheses' as wide as needed, providing a more effective constraint for the creative use of imagination in decision-making. [PART III: ASCENDANCY, XIV: A BASIC MODEL]: Shackle introduces a basic model of decision-making where hypotheses are ordered by both possibility and desirability. He argues that when multiple outcomes are considered perfectly possible, the decision-maker's attention is naturally drawn to the 'brilliant and black extremes'—the best and worst imaginable outcomes—which he terms focus-hypotheses. This section defines the expectation-element as a combination of a suggested future answer and its assigned potential surprise, and the focus-element as that which commands the decision-maker's concentrated attention. [XV: THE NEUTRAL OUTCOME]: This chapter defines the 'neutral outcome' as the essential anchor for dividing hypotheses into those of success and misfortune. Shackle argues that an outcome is neutral if it represents no change from the individual's current 'viewpoint situation' and thus carries zero potential surprise. He explores the subjective nature of wealth and status, noting that a change in expectations immediately alters the individual's assessment of their present situation, ensuring the neutral outcome remains a meaningful point of comparison. [XVI: CARDINALITY]: Shackle discusses the transition from merely ordering intensities of feeling (ordinality) to measuring them (cardinality). Drawing on the work of Armstrong and Frisch, he proposes a method of 'repeated halving' to establish a scale of equal steps for psychic variables like potential surprise and desiredness. This allows for the use of the differential calculus in analyzing the 'ascendancy' or attention-arresting power of expectation elements, even if the variables are private and subjective to the individual. [XVI: CARDINALITY (Footnotes and Conclusion)]: Footnotes and concluding remarks on the cardinality of potential surprise, identifying 'zero surprise' and 'absolute disbelief' as two fixed points on a subjective scale. [XVII: THE CARDINAL POTENTIAL SURPRISE CURVE]: Shackle develops the continuous potential surprise curve, specifically applying it to business investment. He defines investment-gain as the discounted value of future earnings minus construction costs. The resulting 'y-curve' typically takes a basin shape: a horizontal 'inner range' of zero potential surprise (perfectly possible outcomes) flanked by rising 'horns' where potential surprise increases with the magnitude of gain or loss until reaching absolute rejection (maximum potential surprise). [XVIII: THE ASCENDANCY FUNCTION]: This chapter introduces the 'ascendancy function' (phi), which measures the power of an expectation-element to command attention based on its face-value and potential surprise. Shackle describes the 'phi-surface' in a three-dimensional space, where ascendancy increases with the magnitude of gain/loss but decreases as potential surprise rises. He argues that decision-making is a creative act of imagination where the individual selects outcomes that provide the most satisfying committed experience, rather than an objective discovery of a pre-existing future. [XIX: FOCUS ELEMENTS]: Shackle explains how focus elements are determined by the interaction of the potential surprise curve and the ascendancy surface. Mathematically, these are the points where the y-curve is tangent to the highest possible contour lines of the phi-surface. This results in two 'primary focus-elements': one for gain and one for loss. Shackle discusses alternative views on whether these elements are algebraically summed or if one eventually eclipses the other in the decision-maker's mind. [XIX: FOCUS ELEMENTS (Conclusion)]: Final distinction between primary focus gain and loss within the cardinal and ordinal models. [XX: CHOICE AMONGST ACTIONS]: Shackle introduces the 'standardized focus outcome'—the zero-potential-surprise equivalent of a primary focus element. These standardized gains and losses are plotted on a 'gambler indifference map.' The map features indifference curves that represent combinations of gain and loss between which the decision-maker is indifferent. He also discusses the 'scale-opportunity curve,' which relates the size of an investment to its focus outcomes, and addresses Richard Blandy's critique regarding the intersection of these curves across different industries. [XXI: CRITICS OF FOCUS ELEMENTS]: Shackle responds to various critics of his focus-element theory. J.J. Puthucheary suggests a 'wedge' shaped curve centered on a primary hypothesis. Richard Weckstein questions how the theory handles partially ordered alternatives and ignorance. Guy Devillebichot discusses the stability of the phi-surface and the contrast between non-distributive variables and the 'axiomatic coherence' of probability. Shackle defends the selective nature of focus elements, arguing that aggregating mutually contradictory hypotheses is 'senseless' and that true uncertainty precludes calculation. [XXII: MR EGERTON'S THEORY OF ASSET PORTFOLIOS]: Shackle examines R.A.D. Egerton's critique of focus elements in the context of asset portfolios. Egerton argued that if focus outcomes were simply additive, a portfolio would contain at most two assets. Shackle clarifies that focus outcomes of a portfolio are not necessarily the simple sum of the component assets' focus outcomes, especially when assets are adapted to mutually exclusive circumstances. He acknowledges Egerton's contribution in showing the limitations of the additive method and references A.D. Roy's 'safety first' mathematical approach to asset holding. [XXIII: ASCENDANCY IN SUM]: This concluding chapter of Part III synthesizes the sophisticated decision model. It reviews the five core components: the non-distributive uncertainty variable (potential surprise), the potential surprise curve, the concept of the neutral outcome, the ascendancy function (phi-surface) leading to focus elements, and the gambler indifference map. Shackle emphasizes that the model remains valid whether variables are cardinal or ordinal and reiterates that decision-making involves selecting from mutually contradictory hypotheses to create a satisfying imaginative experience. [Part IV: Expectation of Change of Own Expectation]: Shackle introduces Part IV by questioning whether a decision-maker can logically expect their own expectations to change at a future date due to new knowledge. He establishes a theoretical framework where hypothetical outcomes are expressed as algebraic values of a continuous variable, and choices are made by comparing standardized focus outcomes on a gambler indifference map. The chapter distinguishes between situations where the decision-maker has no choice in the action's development (Type 1) and those where they can choose between different paths at an intermediate date (Type 2). [The Rule for Combining Potential Surprise Across Routes]: Shackle proposes a formal rule for combining degrees of potential surprise assigned to intermediate events and ultimate outcomes. He argues that potential surprise does not follow the multiplication rule of probability because it is concerned with possibility and temporal sequence rather than joint frequency. He introduces a formula where the potential surprise of an outcome is the minimum surprise across all possible 'routes,' and the surprise of a specific route is the maximum of the surprise of the intermediate event and the conditional surprise of the outcome. He defends this rule against a critique by W. M. Gorman, emphasizing that the sequence of events (A followed by B vs. B followed by A) is fundamentally different in decision-making. [Refuting Gorman's Critique and the Logic of Surprise Reduction]: Shackle provides a detailed mathematical and logical refutation of W. M. Gorman's criticism regarding the potential surprise of joint occurrences. He argues that Gorman incorrectly assumes the potential surprise of sequences is commutative. Shackle uses the analogy of an explorer crossing mountains and swamps to demonstrate that the most formidable obstacle (the maximum surprise) determines the overall possibility. He concludes that a decision-maker cannot logically expect a reduction in potential surprise at a future date without attaching surprise to the event that would cause such a reduction. [The Spectrum of Conditional y-curves and Viewpoint Expectations]: This section explores the systematic connection between a spectrum of conditional y-curves (representing future possible states of expectation) and the unique viewpoint y-curve. Shackle proves that the viewpoint curve intersects each conditional curve at the point where the surprise of the outcome equals the surprise of adopting that specific curve. He illustrates this with graphical models (Fig. XXIV 1, 2A, 2B), demonstrating how the 'flat-bottomed basin' shape of expectations is maintained even when considering complex future revisions of belief. [Deferred Blueprints and the Integration of Future Choice]: Shackle discusses 'Type 2' relations, where the decision-maker expects to have a choice between different 'blueprints' (deferred action-schemes) at an intermediate date. The viewpoint expectations for the current action-scheme are determined by the best possible outcomes among the blueprints made available by various intermediate events. He uses the example of a 1959 General Election to show how doubts about the timing of an event and the outcome of the event are integrated into a single degree of potential surprise. [Chapter XXV: The Basis of Change of Expectations]: Chapter XXV examines how new information (basis-variable values) leads to the revision of expectations. Shackle introduces the 'range of non-revision'—a set of values for a basis-variable that, if observed, do not trigger a change in the decision-maker's potential surprise curve for the outcome variable. If an observed value falls outside this range or the 'inner range' (where surprise is zero), the decision-maker is logically compelled to reconstruct their expectations. This framework is proposed as an 'insulated dynamic mechanism' for analyzing market price movements and the sequential adjustment of individual expectations. [Part V: Some Economic Illustrations - XXVI: Horizon, Interest and Investment]: Shackle explores the concept of the 'horizon' in economic decision-making, defining it as the most distant future date a decision-maker considers. He argues that horizons are imposed by uncertainty, where the constraints of what is deemed possible disappear as one looks further into the future. The chapter examines theories by J. Mars and Joseph Haring regarding focus gain and loss earnings curves to explain why investors ignore outcomes beyond a certain date. Shackle then uses these concepts to explain the 'interest-inelasticity' of investment, suggesting that because uncertainty cuts off the relevance of remote years, changes in the interest rate (which primarily affect distant values) have little impact on immediate investment decisions unless the rates are exceptionally high. [XXVII: A Theory of the Interest Rate]: This chapter presents a theory of interest rate determination based on bond prices and expectations. Shackle critiques the assumption of unique, certain expectations, proposing instead that wealth-owners form potential surprise curves regarding future bond prices. This model explains the simultaneous holding of money and bonds and accounts for price insensitivity to changes in the money stock. He uses the 'Dalton incident' in British financial history to illustrate how expectations can override changes in the quantity of money in determining interest rates. [XXVIII: Profit and the Range of Non-Revision]: Shackle attempts to unify various economic meanings of 'profit' by adapting Erik Lindahl's concept of income to a framework of uncertainty. He distinguishes between ex ante expectations (focus gains and gain-equivalents) and ex post realizations (windfall receipts). Profit is characterized as the prize for decision-making and uncertainty-bearing. A key concept introduced is the 'range of non-revision'—the bounds within which actual outcomes must fall to avoid a fundamental revision of the decision-maker's future expectations. He argues that 'windfall profit' occurs when realized receipts fall outside the 'inner range' of zero potential surprise. [XXVIII: Profit and the Range of Non-Revision (Continued) and XXIX: Order and Decision in Economics]: The text concludes the discussion on profit by linking windfall receipts to the dynamic increment of gain-equivalents. It then transitions into the final chapter, which synthesizes the book's core thesis: the resolution of the paradox between historical laws and human decision. Shackle argues that while the past does not determine the future (allowing for creative decision), 'natural law' and economic theory provide the constraints (bounded uncertainty) that make decision meaningful rather than arbitrary. He critiques conventional economics for treating choice as a mere logical necessity and asserts that true choice is the creative selection among imagined thoughts. [Part VI: Policy, Profit and Decision - The Nature of Policy and Uncertainty]: Shackle explores the definition of policy as guidance for action under uncertainty, distinguishing between prescriptive and discretionary approaches. He argues that traditional additive probability is insufficient for decision-making because it cannot account for essential novelty or unexpected events. He introduces the concept of potential surprise as a non-additive measure of the 'disconcertingness' of outcomes, which allows for a classification of policies based on their 'capacity' to handle diversity and their degree of sub-division within ranges of no-surprise. [Investment Policy, Valuation, and Elasticities of Surprise]: This section applies the theory of potential surprise to business investment and market valuation. Shackle defines 'focus hypotheses' (upper and lower) for trading revenue and introduces various 'elasticities of surprise' to measure how counter-expected outcomes trigger revisions in plant valuation and future investment intentions. He critiques the notion of 'rationality' in economics, suggesting that economic theory is primarily a taxonomic and classificatory science rather than a purely quantitative one, and that decision-making is an act of origination rather than mere logic. [Conclusion and Bibliography]: The author concludes by defining profit as a measure of the counter-expectedness of results and a guide for policy reconstruction. The segment includes a comprehensive bibliography of books and articles that have discussed Shackle's theory of decision and uncertainty, featuring works by authors such as C.F. Carter, L.M. Lachmann, and Nicholas Georgescu-Roegen. [Bibliography: Articles]: A comprehensive list of academic articles and reviews cited in the work, focusing on decision theory, uncertainty, potential surprise, and economic methodology. Includes works by prominent economists such as Åkerman, Arrow, Carter, and Krelle, as well as several reviews of Shackle's 'Decision Order and Time'. [Bibliography: Articles (Continued)]: Continuation of the alphabetical list of articles, featuring works on potential surprise, subjective probability, and entrepreneurial expectations. Includes citations for Levi, Nicholson, Niehans, and Williams. [Index: A to C]: Detailed index entries for terms starting with A through C. Key concepts indexed include action-schemes, anticipation, the ascendancy function (phi), bond price theory, and the philosophical nature of choice under uncertainty. It references specific discussions on cardinality and the works of Lindahl and Carter. [Index: C to I]: Index entries covering Decision through Investment. This section includes extensive sub-entries for 'decision' (creative, non-empty, unpredictable), 'expectation' (imagination of the possible), and 'focus-elements' (standardization and selection). It also covers the gambler indifference map and the concept of the expectational horizon. [Index: I to Z]: Final index section covering Investment-gain through the end of the alphabet. It features exhaustive entries for 'potential surprise' (axiomatization, cardinality, and rules for combination) and 'probability' (criticisms of its use in unique decisions). It also indexes 'profit' as a dynamic increment and 'time' as the solitary present.