The Use of This Theory to Forecast Future Events

The value of these three laws of probability lies in the fact that they can be used to forecast future events. Future events can be foretold in one of two ways: (1) by a priori or deductive reasoning, and (2) from knowledge of what has happened in the past under similar conditions. The validity of a priori reasoning depends on the completeness with which all the causes at work in the determination of any phenomenon are known; and the limitations of the human mind are such that a priori reasoning does not furnish a safe basis upon which to develop a superstructure guaranteeing that degree of certainty which is required in insurance. Reasoning inductively, or on the assumption that what has happened in the past will happen again in the future if the same conditions are present, does not require an analysis of the causes of phenomena in order to predict future events. There lies behind this statement the assumption that all things are governed by law. In the cases here used to illustrate the principles of probability this is the law of pure chance. It is an even chance one with another that any marble may be drawn from the box or that either side of the coin may be "up". Then if in a great number of trials it has been found that the coin falls "heads up" one-half of the time the conclusion follows that this result will follow approximately if the same number of trials is taken again.

This fact has important bearings upon life insurance. From data showing the length of life and ages at death in the past it is possible to predict probabilities of death and of survival in the future. This prediction is based on the assumption that, like the law of chance, there is a law of mortality by which human beings die; that certain causes are in operation which determine that out of a large group of persons at birth a definite number of lives will fail each year until all have died; and that the force of mortality could be measured if only the causes at work were known. But it is not necessary to analyze this law of mortality completely and to know all the operating causes in order to predict the possible rate of mortality in a group of persons. By studying the rate of death among any group and noting all the circumstances that might, according to our best knowledge, affect that rate, it is possible to surround any future group of persons with approximately the same set of circumstances and expect approximately the same rate of death. Thus without complete knowledge of the law of mortality a working basis is found for predicting future rates of death. It is necessary then to have mortality statistics in order to develop a scientific plan of life insurance.