Probably Overthinking It by Allen B. Downey

Author:Allen B. Downey [Downey, Allen B.]
Language: eng
Format: epub
Tags: MAT000000 MATHEMATICS / General, MAT029000 MATHEMATICS / Probability & Statistics / General
Publisher: University of Chicago Press
Published: 2023-12-06T00:00:00+00:00

The dashed line shows the fraction of disasters that exceed each magnitude of cost. For example, 98% of the disasters exceed a cost of $1 billion, 54% exceed $10 billion, and 7% exceed $100 billion. The solid line shows a lognormal model I chose to fit the data; the shaded area shows how much variation we expect with a sample size of 125. Most of the data fall within the bounds of the shaded area, which means that they are consistent with the lognormal model.

However, if you look closely, there are more large-cost disasters than we expect in a lognormal distribution. To see this part of the distribution more clearly, we can plot the y-axis on a log scale; the following figure shows what that looks like.

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