Probability and Action | What is Insurable?

#economics #probability #insurance

Humans act because we are uncertain about the future. The physical sciences don’t allow us to see into the future when we are dealing with humans. Understanding probability is critical to understanding action. There are two types of probability—class and case. Although there are two types, that doesn’t turn humans into automatons or benign objects that react to a stimulus from a social engineer.

Physics has wreaked more havoc on the economics profession than any other. Some of the worst errors about economics are due to a misunderstanding of probability. It’s difficult to say what causes the most errors about economics, but probability is terribly flawed. Class probability is when we know the frequency within a group. Case probability refers to the chance of a particular event.

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