The significance of decision theory consists of giving an account of rational decision making under circumstances of uncertainty. This question is important both from the point of view of what is in our personal interest and from the point of view of what is ethically right. But decision theory is often poorly understood and its significance only sparsely discussed in the literature.

In a short history of decision theory, it is demonstrated how modern axiomatic decision theory works differently from classical decision theory, but also how it is confused with it. Further, it is explained how modern axiomatic decision theory is an instance of fundamental measurement theory. This is then followed by a thorough introduction to Savage’s version of modern axiomatic decision theory.

Turning to the interpretation of the theory, the maxim “maximize expected utility,” which stems from classical decision theory, is shown to misrepresent the structure of modern axiomatic decision theory. Whereas the classical theory assumes a value assignment to outcomes and derives preferences over uncertain acts, the modern axiomatic approach assumes preferences over uncertain acts and derives the utility assignments. In the modern approach, the action guidance is to conform to the axioms.

Analyzing decision theory as a theory of good, the maxim “maximize expected goodness” repeats the misunderstanding. Moreover, it implies risk neutrality about good and a cardinal measure of good, and both are problematic. Only an ordering of uncertain acts that conforms to the axioms allows for risk aversion about good. If there were an independent cardinal measure of the goodness of outcomes, utility would be an increasing, strictly concave transform of good.

The Principle of Personal Good states the idea that the ordering of uncertain acts according to general betterness should be determined by how good the uncertain acts are for individuals. It sounds like a reasonable idea, and a widely used way of valuing life is based on it. But it is certainly not uncontroversial because it conceals conflicts of interest between individuals in final outcomes. In the context of decision theory for general and individual betterness, the Principle of Personal Good holds if, and only if, general utility is the sum of individual utilities.

The chapter concludes with suggestions for future research.