Answer to Question #212777 in Statistics and Probability for Jhay

Question

What makes the normal curve a suitable model for decision-making?

Answer 1

The short answer is that it’s because of the Central Limit Theorem(s).

One of the most important results in statistics is the fact that most of the time, the sum, or average, of a bunch of random variables is approximately normal.

In layman’s terms, this means that anything that’s the aggregation of a bunch of small things will tend to follow a normal distribution. For this not to be the case, some of the effects must tend to be much larger than others, or there must be a high degree of correlation between the individual things being aggregated. So long as they are independent of each other, and no individual dominates, the aggregate tends towards being normal.

Thus, normal distributions show up a lot in a lot of contexts.