Ockham’s (OCCAM) razor and pareto principle (80/20 rule): The practice of seeking simplicity in risk decisions under uncertainty

When making discrete risk decisions, people intuitively seek problem simplification to reduce the quantity and complexity of available options, a concept that is often anathema to many in engineering disciplines. While the adequacy of a ship’s structural design in high seas is clearly understood and can be assured though application of simple safety margins, or when modeling doping of silicon wafers for chip production requires only the first term of an infinite Taylor series, the same understanding among engineers cannot be assumed for assessing risk decisions. This paper will explore the application of Ockham’s razor (ontological parsimony) and the Pareto Principle (80/20 rule) to risk decisions with the objective of reducing complexity and increasing simplicity through reasonability in decision-making. To simplify the interactions between factors considered in risk and hazard analysis, several behavioral economics studies which counter established utility and rational decision theories will be used in developing a model which applies these two axioms.