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

Thomas J. Monroe, Mario G. Beruvides

Research output: Chapter in Book/Report/Conference proceedingConference contribution

1 Scopus citations

Abstract

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.

Original languageEnglish
Title of host publication39th International Annual Conference of the American Society for Engineering Management, ASEM 2018
Subtitle of host publicationBridging the Gap Between Engineering and Business
PublisherAmerican Society for Engineering Management
Pages495-504
Number of pages10
ISBN (Electronic)9781510874640
StatePublished - 2018
Event39th International Annual Conference of the American Society for Engineering Management: Bridging the Gap Between Engineering and Business, ASEM 2018 - Coeur d�Alene, United States
Duration: Oct 17 2018Oct 20 2018

Publication series

Name39th International Annual Conference of the American Society for Engineering Management, ASEM 2018: Bridging the Gap Between Engineering and Business

Conference

Conference39th International Annual Conference of the American Society for Engineering Management: Bridging the Gap Between Engineering and Business, ASEM 2018
CountryUnited States
CityCoeur d�Alene
Period10/17/1810/20/18

Keywords

  • Complexity
  • Decision-making under uncertainty
  • Ockham’s razor
  • Pareto Principle
  • Prospect Theory
  • Reasonability
  • Simplicity

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  • Cite this

    Monroe, T. J., & Beruvides, M. G. (2018). Ockham’s (OCCAM) razor and pareto principle (80/20 rule): The practice of seeking simplicity in risk decisions under uncertainty. In 39th International Annual Conference of the American Society for Engineering Management, ASEM 2018: Bridging the Gap Between Engineering and Business (pp. 495-504). (39th International Annual Conference of the American Society for Engineering Management, ASEM 2018: Bridging the Gap Between Engineering and Business). American Society for Engineering Management.