How can we assign probabilities in cases of uncertainty? And what is the nature of probabilities, to start with? And what is the rational mechanism for making a choice under uncertainty?

Thomas Bayes lived in the eighteenth century. Bayes’ famous formula shows how to update probabilities given some new evidence. Following is an example for an application of Bayes’ rule:

Suppose that ninety percent of pedestrians cross a certain crosswalk when the light is green, and ten percent cross it when the light is red. Suppose also that the probability of being hit by a car is 0.1% for a pedestrian who crosses on a green light, but the probability of being hit by a car is 2% for a pedestrian who crosses on a red light. A pedestrian is hit by a car at this particular crossing and brought to the hospital. How likely is it that he crossed on a red light?

Well, to start with (or *a priori*), only ten percent of the people who cross the crosswalk cross it on a red light, but now that we are told that this person was hit by a car it makes the probability that he crossed illegally higher. But by how much? Bayes’ rule allows us to compute this (*a posteriori*) probability. I will not describe the mathematical formula, but I will tell you the outcome: the probability that this person crossed on a red light is 2/3.

The Bayesian approach can be described as follows. We start by assigning probabilities to certain events of interest and, as more evidence is gathered, we update these probabilities. This approach is applied to mundane decision-making and also to the evaluation of scientific claims and theories in philosophy of science.

Bayes’ rule tells us how to update probabilities but we are left with the question of how to assign probabilities in cases of uncertainty to begin with. What is the probability of success in a medical operation? What is the chance of your team winning the next baseball game? How likely is it that war will break out in the Middle East in the next decade? How risky are your stock-market investments? Continue reading