Savage S.L. The flaw of averages: why we underestimate risk in the face of uncertainty

John Wiley & Sons, Inc., 2009, - 419 pages.The book discusses concepts from both statistics and economics and describes a set of common avoidable mistakes in assessing risk in the face of uncertainty. The book has three sections. The first, Foundations, provides a basis for visualizing risk and uncertainty using simple everyday props such as gameboard spinners and dice. It describes the sorts of consistent errors that occur when uncertain numbers are replaced by single average values: the Flaw of Averages. The second part, Applications, describes classic cases of the Flaw of Averages in the real world. The third part describes a potential path toward a cure for the Flaw of Averages: Probability Management.