CHAPTER XV. CONCERNING THE BENEFITS OF INSTITUTIONS WHICH DEPEND UPON THE PROBABILITY OF EVENTS.
Let us recall here what has been said in speaking of hope. It has been seen that in order to obtain the advantage which results from several simple events, of which the ones produce a benefit and the others a loss, it is necessary to add the products of the probability of each favorable event by the benefit which it procures, and subtract from their sum that of the products of the probability of each unfavorable event by the loss which is attached to it. But whatever may be the advantage expressed by the difference of these sums, a single event composed of these simple events does not guarantee against the fear of experiencing a loss. One imagines that this fear ought to decrease when one multiplies the compound event. The analysis of probabilities leads to this general theorem.
By the repetition of an advantageous event, simple or compound, the real benefit becomes more and more probable and increases without ceasing; it becomes certain in the hypothesis of an infinite number of repetitions;
and dividing it by this number the quotient or the mean benefit of each event is the mathematical hope itself or the advantage relative to the event. It is the same with a loss which becomes certain in the long run, however small the disadvantage of the event may be.
This theorem upon benefits and losses is analogous to those which we have already given upon the ratios which are indicated by the indefinite repetition of events simple or compound; and, like them, it proves that regularity ends by establishing itself even in the things which are most subordinated to that which we name hazard.
When the events are in great number, analysis gives another very simple expression of the probability that the benefit will be comprised within determined limits. This is the expression which enters again into the general law of probability given above in speaking of the probabilities which result from the indefinite multiplication of events.
The stability of institutions which are based upon probabilities depends upon the truth of the preceding theorem. But in order that it may be applied to them it is necessary that those institutions should multiply these advantageous events for the sake of numerous things.
There have been based upon the probabilities of human life divers institutions, such as life annuities and tontines. The most general and the most simple method of calculating the benefits and the expenses of these institutions consists in reducing these to actual amounts. The annual interest of unity is that which is called the rate of interest. At the end of each year an amount acquires for a factor unity plus the rate of interest; it increases then according to a geometrical progression of which this factor is the ratio. Thus in the course of time it becomes immense. If, for example, the rate of interest is 1⁄20