science

Principled reasoning

Principled reasoning is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Principled reasoning rather than just read about it. In short: Principled reasoning (also known as principles-based reasoning and principle-centered reasoning) is an alternative to modern portfolio theory based on a different conception of risk. Concept Modern portfolio theory, according to its founder, Harry Markowitz, equates risk with "variance of returns." Principled reasoning offers a critique of modern portfolio theory and its related departure from classical economics in…

Key takeaways

Principled reasoning belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Principled reasoning to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Principled reasoning from memory before moving on to harder problems.

Reference excerpt

Principled reasoning (also known as principles-based reasoning and principle-centered reasoning) is an alternative to modern portfolio theory based on a different conception of risk.

Concept Modern portfolio theory, according to its founder, Harry Markowitz, equates risk with "variance of returns." Principled reasoning offers a critique of modern portfolio theory and its related departure from classical economics in evaluating markets in isolation from production and consumption. Principled reasoning holds that risk is partly a function of failure to adhere to foundational principles of national prosperity in the country of domicile of the investment.

Foundational principles Principled reasoning contrasts with modern portfolio theory's Humean skepticism, drawing instead on the Sermon on the Mount. Principled reasoning holds that a community which honors the proper cultural, legal, and economic principles is like a house built on rock, which puts it at an inherently lower level of risk, while a community which does not honor the proper principles is like a house built on a foundation of sand, and is at inherently higher risk. The risks associated with lack of principle adherence are not, according to principled reasoning, necessarily or even usually manifested in the short run, but may take long periods of time to manifest in visible form. Principle reasoning is associated with the economist Jerry Bowyer, investment strategist Vince Birley, and theologian Ken Boa, who presented the idea at the annual conference of Kingdom Advisors and collaborated on a book on the subject.

References

Worked examples

Example 1 — a first encounter with Principled reasoning

Start with the simplest possible case. Write down what Principled reasoning claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Principled reasoning before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Principled reasoning ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Principled reasoning

In research: Principled reasoning appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Principled reasoning in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Principled reasoning is common in secondary-school and first-year university syllabi. It links to neighbouring topics Economic terminology stubs, Finance theories, Financial economics, so understanding it makes those chapters shorter.
In everyday life: Look for Principled reasoning outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study Principled reasoning in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Principled reasoning means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Principled reasoning out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Principled reasoning in simple terms?

Principled reasoning (also known as principles-based reasoning and principle-centered reasoning) is an alternative to modern portfolio theory based on a different conception of risk. Concept Modern portfolio theory, according to its founder, Harry Markowitz, equates risk with "variance of returns."…

Why does Principled reasoning matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Principled reasoning?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Principled reasoning.