OpenCourseWare on critical thinking, logic, and creativity

Life's a gamble

The theory of probability arose out of the study of gambling, as we saw earlier. Gambling is essentially a kind of risk; you risk a financial loss in the hope of a financial gain. Probability can be used to measure the risk, and to help you assess whether a particular kind of bet is worth taking. Not surprisingly, then, the most straightforward application of probability is to other forms of risk-taking behavior.

The most obvious kinds of risk-taking behavior are economic. For example, investing in the stock exchange is clearly related to gambling, in that the investor accepts a degree of financial risk in the hope of financial gain. But risk-taking is involved in virtually every kind of human activity. When you take medicine, there is always a risk of adverse effects; when you take a bus, there is always a risk that you will be injured in an accident; and so on. Probability can be used to help us make reasonable choices in the face of the inevitable risks involved in life.

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