Perceived Probability, Natural Frequencies, and Irrationality

Alison Shcraeger, economist and author of An Economist Walks Into a Brothel, explains how risk really works and why most people misunderstand it. From studying sex workers in Nevada to analyzing probability theory, Alison reveals that humans are not naturally wired to process probabilities—but we can learn. She introduces the concept of natural frequencies over percentages, showing how translating 55 percent into 55 out of 100 helps people make better decisions. This conversation explores why probability theory should be taught like reading, how emotion distorts risk assessment, why the past is a flawed predictor of the future, and what economists can learn from industries society prefers to ignore.

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