A Bayesian approach to the group versus individual prediction controversy in actuarial risk assessment.
Recent attempts to indict the use of actuarial risk assessment instruments have relied on confidence intervals to demonstrate that risk estimates derived at the group level do not necessarily apply to any specific individual within that group. This article contends that frequentist confidence intervals are inapposite to the current debate. Instead, Bayesian credible intervals are necessary-in principle-to accomplish what commentators are concerned about: describing the precision of an actuarial risk estimate. After illustrating both the calculation and interpretation of credible intervals, this article shows how such intervals can be used to characterize the precision of actuarial risk estimates. It then explores the legal implications of wide and overlapping intervals. Contrary to what detractors claim, the fact that risk estimate intervals overlap is not a germane to legal (logical) relevance, and therefore actuarial risk estimates cannot be per se "inadmissible" on this basis.
Department of Psychology, University of Southern California, Los Angeles, CA 90089, USA. scurich@usc.edu
Nicholas
N
Scurich
Richard S
RS
John
D000206:Actuarial Analysis; D001499:Bayes Theorem; D016001:Confidence Intervals; D006801:Humans; D012306:Risk; D018570:Risk Assessment / Q000379:methods / Q000706:statistics & numerical data*