No Free Lunches: Bernoulli is Right, Keynes is Wrong
What the Big Bang teaches us about nothingJacob Bernoulli made a now obvious observation about probability over three-and-a-half centuries ago: If nothing is known about the outcome of a random event, all outcomes can be assumed to be equally probable. Bernoulli’s Principle of Insufficient Reason (PrOIR) is commonly used. Throw a fair die. There are six outcomes, one for each face of the cube. The chance of getting five pips showing on the roll of a die is therefore one sixth. If a million lottery tickets are sold and you buy one ticket, the chances of winning are one in a million. This reasoning is intuitively obvious. The assumption about the die is wrong if the die is loaded. But you don’t know that. You know nothing. So Bernoulli’s PrIOR…
