Edited by John B. Davis, Alain Marciano and Jochen Runde
Chapter 22: Conceptions of Probability
Charles R. McCann, Jr. Introduction Economic theory has from its earliest incarnations focused upon the intricacies of individual decision-making; economics (as catallactics) is primarily concerned with the choices and actions of individuals who have a necessarily imperfect apprehension of the consequences of their actions through an unpredictable future. The incorporation of probability in economics thus became manifest as the natural consequence of the very nature of individual decision-making. Many important early contributors to economics – A.A. Cournot, F.Y. Edgeworth, Alfred Marshall, W. Stanley Jevons, Ludwig von Mises, to name but a few – either wrote on the topic of probability itself, included digressions on the subject in their economic treatises, or employed probability arguments. Marshall, for example, became embroiled in a newspaper debate with Karl Pearson relating to the latter’s statistical study of parental alcoholism;1 Edgeworth made signiﬁcant contributions to both probability and statistical theory.2 This chapter will address only certain philosophical aspects of probability. The focus will be on knowledge and belief, and the way in which probability theorists have attempted to model them. Probability as it is employed in statistics and econometrics will not be considered. Knowledge and belief Before discussing probability proper, it is necessary to clarify certain terms. The term ‘knowledge’ denotes certain belief. This is not to be construed as coincident with mere belief, feeling, or any other normative criterion, but is essentially a conclusion drawn from evidence and limited to that evidence. Belief alone – mere belief –is not a legitimate condition for knowledge; even...
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