Nugget: Prof. Pigliucci of Rationally Speaking on Why We Should Use Odds

A very compelling argument on the use of odds instead of probabilities on by Prof. Massimo Pigliucci on his Rationally Speaking Blog:

“Alice the juror believes that Casey Anthony is guilty, with probability 90%. Bob the juror also believes she is guilty, with probability 99%. They seem to pretty much agree with each other, and yet…
If we switch over to odds, we find that Alice gives odds of 9:1 in favour of guilt, while Bob gives 99:1. This is more than an order-of-magnitude difference! Actually, Alice is substantially less convinced than Bob; they should still be arguing! Alice still entertains reasonable doubt — at this point, she should probably vote to acquit.”
[…]
In summary:

– Quantifying uncertainty about all sensible questions is a crucial cognitive tool, both for eliminating all-or-nothing thinking and for reminding us to always use our substantial background knowledge.
– Odds are more useful than probabilities for this purpose, because they have: more appropriate mental associations for most humans; good mathematical properties showing the folly of extreme cases (perfect certainty); and an intuitive relation to frequency that humans readily understand. Also, talking in odds will make you sound badass.”

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Filed under Fundamental Finance, Nuggets

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