# Bayes and the Taxi Problem – in a nutshell.

**Bayes and the Taxi Problem.**

To help explain how Bayes’ Theorem can be applied in practice, let’s start with the classic Bayesian Taxi Problem. It goes like this. New Amsterdam has 1,000 taxis. 850 are yellow, 150 are green. One of these taxis knocks down a pedestrian and then is driven away without stopping. We have no reason to believe that drivers of green taxis are any more or any less likely than drivers of yellow taxis to knock down a pedestrian and drive away. Neither do we have any reason to believe that green or yellow taxis are disproportionately represented in the area of New Amsterdam where the hit and run took place. There is one witness, however, who did see the event. The witness says the colour of the taxi was green. The witness is given a rigorous observation test, which recreates as closely as possible the event in question, and her judgment proves correct 80 per cent of the time. We have no reason to doubt the integrity of the witness.

So what is the probability that the taxi was green?

The intuitive answer is in the region of 80 per cent, as the only evidence is that of the witness, and the test of her powers of observation shows that she is right 80 per cent of the time. That is not the Bayesian approach, however, which is to consider the evidence in the light of the baseline, or prior, probability that the taxi was green before the witness evidence came to light. The prior probability can be derived from an identification of the proportion of taxis in New Amsterdam that are green. This is 15 per cent (of the 1,000 taxis, 150 are green).

Now, the (posterior) probability that a hypothesis is true after obtaining new evidence, according to the a,b,c formula of **Bayes’ Theorem**, is equal to:

*ab/ [ab + c(1-a)]*

In this case, the hypothesis is that the taxi that knocked down the pedestrian was green.

a is the prior probability, i.e. the probability that a hypothesis is true before the new evidence arises. This is 0.15 (15%) because 15% of the taxis in New Amsterdam are green.

b is the probability the new evidence would arise if the hypothesis is true. This is 0.8 (80%). There is an 80% chance that the witness would say the taxi was green if it was indeed green.

c is the probability the new evidence would arise if the hypothesis is false. This is 0.2 (20%). There is a 20% chance that the witness would be wrong and identify the taxi as green if it was in fact yellow.

Inserting these numbers into the formula, ab/ [ab + c(1-a)], gives:

Posterior probability = 0.15 x 0.8/ [0.15 x 0.8 + 0.2 (1 – 0.15)] = 0.41 = 41 per cent.

In other words, the true probability that the taxi that knocked down the pedestrian was green is not 80 per cent (despite the witness evidence) but about half that. The baseline probability is that important.

If new evidence subsequently arises, Bayesians are not content to leave the probabilities alone. Say, for example, that a new witness appears, totally independent of the other, and is also given the observation test, revealing a reliability score of 90 per cent. Again, we have no reason to doubt the integrity of this witness. What a Bayesian does now is to insert that number (0.9) into Bayes’ formula (y=0.9) so that c (the probability that the witness is mistaken) = 0.1. The new baseline (or prior) probability, a, is no longer 0.15, as it was before the first witness appeared, but 0.41 (the probability incorporating the evidence of the first witness). In this sense, yesterday’s posterior probabilities are today’s prior probabilities.

Inserting into Bayes’ Theorem, the new posterior probability = 0.86 = 86%. This is also the new baseline probability underpinning any new evidence which might arise.

There are three key illustrative cases of the Bayesian Taxi Problem which bear highlighting. The first is a scenario where the new witness scores 50 per cent on the observation test. Here is a case where intuition and Bayes’ formula converge. Intuition tells us that a witness who is right only half the time about the colour of the taxi is also wrong half the time, and so any evidence they give is worthless. Bayes’ Theorem tells us that this is indeed so, as the posterior probability ends up being equal to the prior probability.

The second illustrative case is where a new witness is 100 per cent reliable about the colour of the taxi. In this case, b =1 and c =0. Intuition tells us that the evidence of such a witness solves the case. If the infallible witness says the taxi was green, it was green. Bayes’ Theorem agrees.

This leads directly to the third illustrative case. If the new witness scores 0 per cent on the observation test, this indicates that they always identify the wrong colour for the taxi. If they say it is green, it is definitely not green. So the chance (posterior probability) that the taxi is green if they say so is zero. This accords with Bayes’ Theorem.

More generally, information that a witness is usually wrong is valuable, as it can be reversed to useful effect. So if the witness says the taxi is yellow, we can now identify the taxi as definitely green. This now converges on the second illustrative case.

Similarly, a witness who is right, say, only 25 per cent of the time in identifying the colour of the taxi in the observation test also yields us valuable information. By reversing the identified colour, this yields a 75 per cent reliability score, which can be inserted accordingly into Bayes’ Theorem to update the probability that the taxi that knocked down the pedestrian was green.

The only observation evidence that is worthless, therefore, is evidence that could have been produced by the flip of a fair coin.

The Bayesian taxi problem is in fact an instance of what is known as the Base Rate Fallacy, which occurs when we disregard or undervalue prior information when making a judgment on how likely something is. If presented with related base rate information (i.e. generic, general information) and specific information (information pertaining only to a certain case), the fallacy can also arise from a tendency to focus on the latter at the expense of the former. For example, if we are informed that someone is an avid book-lover, we might think it more likely that they are a librarian than a nurse. There are, however, many more nurses than librarians. In this example, we have not taken sufficient account of the base rate for the number of nurses relative to librarians.

And the conclusion to the case? CCTV evidence was later produced in court which was able to identify conclusively the taxi and the driver. The pedestrian never regained consciousness. The driver of what turned out to be a yellow taxi told the jury that the pedestrian unexpectedly stepped out and brushed against the passenger side door. He thought at the time that it was a very minor incident, and was completely unaware that the victim had slipped and hit his head awkwardly.

This was rejected by the jury, who accepted the prosecution’s contention that the taxi driver had acted with premeditation and malicious intent. They based their decision on their acceptance that a driver motivated by premeditated malice would indeed have driven off. They equated this with accepting that anyone who drove off must have been motivated by premeditated malice. It was all the evidence they needed to reach their unanimous verdict of first degree murder. Each member of the jury later left the court unaware that they had committed the classic Prosecutor’s Fallacy.

James Parker, a 29-year-old long-time resident of New Amsterdam, of previous good character, with no previous convictions or any known motive for the crime, is currently serving a sentence of life in a maximum security prison with no possibility of parole.

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**Appendix**

In the original taxi problem scenario:

a = 0.15 (15 per cent of taxis are green)

b = 0.8 (the witness is correct 80 per cent of the time)

c = 0.2 (the witness is wrong 20 per cent of the time)

Inserting these numbers into the formula gives:

Posterior probability = (0.15 x 0.8)/ (0.15×0.8 + 0.2×0.85) = 0.12/ (0.12+0.17) = 41% (rounded to the nearest per cent).

This is the new baseline probability underpinning any new evidence which might arise.

If new evidence subsequently arises, such that a = 0.41, b = 0.9, c = 0.1. New posterior probability = 0.41 x 0.9/ (0.41×0.9 + 0.1×0.59) = 0.369/ (0.369+0.059) = 86% (rounded to the nearest per cent). This is also the new baseline probability underpinning any new evidence which might arise.

Solution to the three illustrative cases of the Bayesian Taxi Problem.

- A scenario where the new witness scores 50 per cent on the observation test. In terms of the equation, such a witness would be accorded b = 0.5 and c = 0.5.

PP = ab/ [ab+ c (1-a)] = 0.5a / [0.5a + 0.5 (1-a)] = 0.5a / (0.5 + 0.5a – 0.5a) = 0.5a / 0.5 = a

So when b and c both equal 0.5 in regard to new evidence, this evidence has no impact on the probability of the hypothesis being tested being true. The posterior probability equals the prior probability. In this case, the witness’s evidence can be discounted.

- The second illustrative case is where a new witness is 100 per cent accurate about the colour of the taxi. In this case, b =1 and c = 0. Intuition tells us that the evidence of such a witness solves the case. If the infallible witness says the taxi was green, it was green. Bayes’ formula agrees. Inserting b = 1, c = 0 into the formula gives:

ab/[ab + c(1-a)] = a / (a + 0) = a/a = 1.

So the new (posterior) probability that the taxi is green = 1.

- This leads directly to the third illustrative case. If the new witness scores 0 per cent on the observation test, this indicates that they always identify the wrong colour for the taxi. If they say it is green, it is definitely not green. So the chance (posterior probability) that the taxi is green if they say so is zero. This accords with the formula.

ab/ [ab + c(1-a)] = 0 / [0 + (1-a)], assuming a is not equal to 1 = 0.

If a = 1 and b = 0, the question is meaningless (as we are saying that the taxi is definitely green (a=1) and it is definitely not green (b=0) and so the equation is undefined.

**Exercise**

**Question a.** New Amsterdam has 1,000 taxis. 800 are yellow, 200 are green. There is no reason for us to believe that one particular colour of taxi is more likely to knock down a pedestrian in the area that the accident occurred, or to believe that the behaviour of green or yellow taxi drivers is likely to differ in the event of knocking down a pedestrian.

One of these taxis now knocks down a pedestrian and drives away. There is one witness, who saw the event. The witness says the colour of the taxi was green.

The witness is given a well-respected observation test, and is right 80% of the time. We can be quite sure from the result that there is a probability of 80% that the witness identifies the colour of the taxi correctly.

What is our best estimate now of the probability that the taxi was green?

**Question b.** What if a second witness, independent of the first, now comes forward?

We determine that the probability that this witness is correct when identifying the colour of the taxi is 70%.

The witness says the colour of the taxi was green.

What is the new posterior (updated) probability that the taxi that knocked down the pedestrian is green?

**Question c.** What if a third witness, independent of the first and second, now comes forward?

We determine that the probability that this witness is correct when identifying the colour of the taxi is 50%.

The witness says the colour of the taxi was green.

What is the new posterior (updated) probability that the taxi that knocked down the pedestrian is green?

*References and Links*

Salop, S.C. (1987). Evaluating uncertain evidence with Sir Thomas Bayes: A Note for Teachers. Economic Perspectives, 1, 1, Summer, 155-160. https://pubs.aeaweb.org/doi/pdf/10.1257/jep.1.1.155

Bedwell, M. (2015). Slow thinking and deep learning: Tversky and Kahneman’s Cabs. Global Journal of Human-Social Science,15,12. https://www.socialscienceresearch.org/index.php/GJHSS/article/download/1634/1575

Base Rate Fallacy. The Decision Lab. https://thedecisionlab.com/bias/base-rate-fallacy/

Salop, S.C. (1987). Evaluating uncertain evidence with Sir Thomas Bayes: A Note for Teachers. Economic Perspectives, 1, 1, Summer, 155-160. https://pubs.aeaweb.org/doi/pdf/10.1257/jep.1.1.155

Bedwell, M. (2015). Slow thinking and deep learning: Tversky and Kahneman’s Cabs. Global Journal of Human-Social Science,15,12. https://www.socialscienceresearch.org/index.php/GJHSS/article/download/1634/1575

Base Rate Fallacy. The Decision Lab. https://thedecisionlab.com/bias/base-rate-fallacy/

Base Rate Fallacy. In: Paradoxes of probability and other statistical strangeness. UTS, 5 April, 2017. S. Woodcock. __http://newsroom.uts.edu.au/news/2017/04/paradoxes-probability-and-other-statistical-strangeness__

Tversky, A. and Kahneman, D. (1982), Evidential Impact of Base Rates. In: Kahneman, D., Slovic, P. and Tversky, A., Judgment Under Uncertainty: Heuristics and Biases. __https://www.cambridge.org/core/books/judgment-under-uncertainty/evidential-impact-of-base-rates/CC35C9E390727085713C4E6D0D1D4633__

Base Rate Fallacy. Wikipedia. __https://en.wikipedia.org/wiki/Base_rate_fallacy__

Know Your Bias: Base Rate Neglect. https://youtu.be/YuURK_q2NR8

Base Rate Fallacy. https://youtu.be/Fs8cs0gUjGY

Counting Carefully. The Base Rate Fallacy. https://youtu.be/VeQXXzEJQrg