Expected Value
Etymology
“Expect” is from Latin “exspectare” (to look out for), ex- plus spectare (to look). The concept grew from 17th-century probability, especially Christiaan Huygens’s 1657 treatment of “expectation” in games of chance.
noun phrase · /ik-SPEK-tid VAL-yoo/
The long-run average outcome of a choice, weighting each possible result by its probability.
What it names
It gives a rational yardstick for decisions under uncertainty — and shows why the average outcome may be one nobody experiences.
Example
A lottery ticket costing 2 dollars with an expected value of 70 cents is, on average, a losing bet no matter how big the jackpot.
Related idea
Expected value ignores how much you can afford to lose, which variance captures; a bet with positive expected value but ruinous downside can still be foolish — the flaw behind many “the odds are in our favor” gambles.
See also