ECO331H1 Lecture 4: Lecture 4 People and Probability
Document Summary
Statistics: probability is hard, two basic questions of statistics, we assess probabilities but do not actually calculate them. Want to know if people get close and if errors are random even if not actually calculated. What is likelihood that x happens: assigning probability to x. How do beliefs change with new information: how is this information used to update beliefs, basic insights of statistics: With few observations, extreme outcomes not uncommon. With a lot of observations, extreme outcomes unlikely. This is where hypothesis testing comes in: statistical significance, bayes rule: Insensitivity to base rates: ignoring that there are more eco102 students, assessing probability is hard, but assessing similarity is easy. Rankings of probability and similarity turn out to be same. Law of small numbers: expect sequence of events from random process will reflect the essential characteristics of that process even if the sequence is short.
