• Posted by Konstantin 09.01.2016 No Comments

    This is a (slightly updated) repost of my quora answer to the corresponding question.

    There are many ways in which smart people tend to explain Bayesian statistics and contrast it with a "non-Bayesian" one. One usually highlights that the primary concept of a Bayesian approach is the the desire to model everything as a probability distribution. Once this is fact is clear, many smart people would proceed to claim that this is, in fact, what fundamentally sets Bayesian statistics aside from the "classical" one. However, I feel that this kind of explanation is somewhat incomplete. It is not like classical statisticians do not use complete probability distributions. The difference is in general somewhat more subtle and philosophical.

    Consider the question "what is your height?". For a classical statistician there exists some abstract "true answer", say "180cm", which is a fixed number - your one and only height. The problem is, of course, you do not know this number because every measurement is slightly different, so the classical statistician will add that "there is a normally-distributed measurement error". In the world of a pure Bayesian there are almost no "fixed numbers" - everything is a probability distribution, and so is your height! That is, a Bayesian should say that "your height is a Normal distribution centered around 180cm".

    Note that from the mathematical perspective there is no difference between the two representations - in both cases the number 180cm is mentioned, and the normal distribution. However, from a philosophical, syntactical, methodological and "mental" perspectives this tends to have serious implications, and there has been historically a kind of an ongoing intellectual feud between the statisticians who lend more towards the first or the second approach (it is somewhat resemblant of how there is a divide among the physicists with regard to their support of the Copenhagen interpretation of quantum mechanics).

    One of the implications of denying the fact that things in the world are mostly fixed (and are all pure distributions instead) is that you may not use many of the common sense inference methods directly. What is my height if I stand on a chair? "Well, it is your height plus the height of a chair", a classical statistician would say. He can keep in mind the measurement errors, if necessary, but those could be dealt with later. In the Bayesian world heights are not numbers, so the procedure of adding heights implies convoluting two distributions to get the resulting distribution. If both distributions are Gaussian, the result will match that of the "common sense", but note that now the common sense somehow became "just one special case". Moreover, a Bayesian might even keep the possibility that "your height and the height of the chair are dependent" in the back of his mind, just in case. Because when you speak about two numbers in the Bayesian world, you must immediately start thinking about their joint distribution.

    On the other hand, modeling everything in probabilities lets you use probability theory inference methods (Bayes rule, convolutions, marginalizations, etc) everywhere, without the need to differentiate between "fixed numbers" and "random measurement errors" and this adds peace of mind as well as tends to make your explanations clearer. A Bayesian confidence interval, for example, is a "fixed interval such that 95% of height measurements fall into it". A classical confidence interval, on the other hand, is "a random interval such that the true height may fall into it with 95% probability". Again, mathematically and numerically those may often be the same, but think how different the two explanations are.

    Bayesian "thinking" tends to be more flexible for complex models. Many classical statistics models would stick to fixed parameters, point or "interval" inferences, and try to "hide" the complexity of probability distributions as much as possible. As a result, reasoning about a system with many highly interconnected concepts becomes flawed. Consider a sequence of three questions:

    • What the height of this truck?
    • Will it fit under this 3m bridge?
    • Do we need pick another route?

    In the "classical" mindset you would tend to give fixed answers to the questions.

    • "Height of the truck is 297".
    • "Yes, 297<300, hence it will fit".
    • "No, we do not need".

    Sometimes you may be more careful and work with confidence intervals, but it still feels unwieldy:

    • "The confidence interval on the height of the truck is 290..310"
    • ".. aahm, it might not fit..."
    • "let's pick another route, just in case"

    Note, if a followup question appears that depends on the previous inferences (e.g. "do we need to remodel the truck") answering it becomes even harder because the true uncertainty is "lost" in the intermediate steps. Such problems are never present if you are disciplined as a Bayesian. Note the answers:

    • "The height of the truck is a normal distribution N(297, 10)"
    • "It will fit under the bridge with probability 60%"
    • "We need another route with probability 40%"

    At any point is information about the uncertainty is preserved in the distributions and you are free to combine it further, or apply a decision-theoretic utility model. This makes Bayesian networks possible, for example.

    It is interesting to see how this largely philosophical preference leads to two completely different (albeit complementary) sets of techniques. Indeed, if you are a true classical statistician, your work revolves around parameterized probability distributions. You write them down like P_\alpha(x), where x is the "truly random" value from some probability space, and \alpha is the "fixed but unknown" parameter. Your whole "school of thought" is now focused on clever ad-hoc techniques for computing estimates of this fixed parameter from the provided distribution.

    For a pure Bayesian, however, there is no "fixed" \alpha that has to be treated somehow separately. Instead, \alpha is also a part of some probability space, and instead of writing P_\alpha(x) he would safely write P(x| \alpha), P(\alpha | x), or P(x, \alpha). As a result, the probability distribution he works with are not parameterized any more, and all of the clever techniques that the classical statisticians have invented over the centuries for estimating parameters become seemingly useless. At this point a classical statistician puts his hands down and goes home, as there is nothing to do for him - there are no "unknowns". The Bayesian is, however, left to struggle with mathematically trivial, yet computationally incredibly heavy methods for extracting essentially the same values that the classical statistician could have obtained using his "parameter estimation" approaches. That's why the Bayesian "school of thought" is mostly focused on computationally-efficient methods for marginalization and sampling.

    In reality, of course, a Bayesian would quite often give up and "cheat", at least partially parameterizing his models and making use of the classical estimation methods, while a "classical" statistician might happen to write P(x|\alpha) and apply the Bayes rule here and there, whenever it seems appropriate. A number of computations derived from the two theoretical backgrounds end up exactly the same.

    Thus, in practice, labeling things as "Bayesian" or "non-Bayesian" is still largely a philosophical choice. For example, there are methods in machine learning, ensemble learners, that are somewhy never labeled/marketed as being "Bayesian" nor were they probably invented by someone "Bayesian", although at their core those would be among the best examples of where a Bayesian approach is different from a classical one. Those are also among the best performant models quite often, by the way.

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  • Posted by Konstantin 04.01.2016 5 Comments

    Collecting large amounts of data and then using it to "teach" computers to automatically recognize patterns is pretty much standard practice nowadays. It seems that, given enough data and the right methods, computers can get quite precise at detecting or predicting nearly anything, whether it is face recognition, fraud detection or movie recommendations.

    Whenever a new classification system is created, it is taken for granted that the system should be as precise as possible. Of course, classifiers that never make mistakes are rare, but if it possible, we should strive to have them make as few mistakes as possible, right? Here is a fun example, where things are not as obvious.


    Consider a bank, which, as is normal for a bank, makes money by giving loans to its customers. Of course, there is always a risk that a customer will default (i.e. not repay the loan). To account for that, the bank has a risk scoring system which, for a given loan application, assesses the probability that the corresponding customer may default. This probability is later used to compute the interest rate offered for the customer. To simplify a bit, the issued interest on a loan might be computed as the sum of customer's predicted default risk probability and a fixed profit margin. For example, if a customer is expected to default with probability 10% and the bank wants 5% profit on its loans on average, the loan might be issued at slightly above 15% interest. This would cover both the expected losses due to non-repayments as well as the profit margin.

    Now, suppose the bank managed to develop a perfect scoring algorithm. That is, each application gets a rating of either having 0% or 100% risk. Suppose as well that within a month the bank processes 1000 applications, half of which are predicted to be perfectly good, and half - perfectly bad. This means that 500 loans get issued with a 5% interest rate, while 500 do not get issued at all.

    Think what would happen, if the system would not do such a great job and confused 50 of the bad applications with the good ones? In this case 450 applications would be classified as "100%" risk, while 550 would be assigned a risk score of "9.1%" (we still require the system to provide valid risk probability estimates). In this case the bank would issue a total of 550 loans at 15%. Of course, 50 of those would not get repaid, yet this loss would be covered from the increased interest paid by the honest lenders. The financial returns are thus exactly the same as with the perfect classifier. However, the bank now has more clients. More applications were signed, and more contract fees were received.

    True, the clients might be a bit less happy for getting a higher interest rate, but assuming they were ready to pay it anyway, the bank does not care. In fact, the bank would be more than happy to segment its customers by offering higher interest rates to low-risk customers anyway. It cannot do it openly, though. The established practices usually constrain banks to make use of "reasonable" scorecards and offer better interest rates to low-risk customers.

    Hence, at least in this particular example, a "worse" classifier is in fact better for business. Perfect precision is not really the ultimately desired feature. Instead, the system is much more useful when it provides a relevant and "smooth" distribution of predicted risk scores, making sure the scores themselves are decently precise estimates for the probability of a default.

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