Statistics in a Nutshell

Chapter 2. Probability

In a conventional textbook, this chapter would be titled something like “A Brief Introduction to Probability Theory” or “Fundamentals of Probability for Beginners,” in either case warning you that a Very Serious Topic was about to be broached, and that however forbidding the chapter might appear, it was only scratching the surface of a subject beyond the comprehension of most poor mortals.

Well, I don’t buy any of it. Probability theory is the very basis of statistics, and it is a fascinating topic in its own right. But while it can become as complex as any other field of human endeavor, there’s no reason why anyone willing to put in the time can’t come to understand it. The basic principles of probability are simple to state, and intuitive and easy to comprehend. What’s more, most people are already familiar with probabilistic statements, from the weather report that tells you there is a 30% chance of rain this afternoon to the warning on cigarette packages that smoking increases the risk for lung cancer.

If like most adults you hold one or more insurance policies, you are already engaged in a probabilistic enterprise. For instance, you probably have some kind of automobile insurance, which should really be called “automobile expenses insurance,” since its primary purpose is to protect the policy-holder against extreme expenses that may be incurred due to an automobile accident. People don’t purchase insurance policies because they are planning to get into ...