Confused by the Odds: How Probability Misleads Us

In this lucid and accessible primer, former Stanford Business School lecturer Lockwood (Fooled by the Winners) explains the uses and the misuses of statistics. Interlacing his math lessons with intriguing anecdotes, Lockwood notes that if an email contains the word “free,” there is a 43% probability that it is spam; that financial risk models used by Wall Street executives allow them to “leverage up their firms to increase profits” because the models fail to factor in “the non-normality of stock market prices”; and that psychologist Barbara Stoddard Burks (1902—1943) was never offered a full professorship, despite being decades ahead of her time in applying statistics to the social sciences. Lockwood also exposes errors sprung from the unthinking use of statistics, such as the 1959 finding that smoking was correlated with healthier babies, caused by conflating mortality rates for underweight babies resulting from smoking with those for underweight babies resulting from birth defects (the latter had more serious disabilities and were prone to die, suggesting that smoking improved the mortality of underweight babies). Appyling Bayes’s theorem and causal diagrams to examine how Americans have become “trapped in a vicious circle of misinformation and distrust that reinforces prior beliefs and further divides Democrats and Republicans,” Lockwood concludes with a persuasive argument for learning statistics to make better sense of the world. The result is in illuminating guide to an intimidating subject. (Jan.)