Maximum Likelihood Estimation (MLE) Explained

Introduction

Prerequisites: This chapter assumes familiarity withSampling Distributions and basicProbability Distributions.

Throughout statistics, we often assume we know the population parameters (like mean \mu or variance \sigma^{2} But in the real world, we never know these values. We only have data.

The Core Question

Given some observed data, what are the most reasonable values for the unknown parameters?

Maximum Likelihood Estimation (MLE) answers this by asking: "Which parameters would have made our observed data most probable?" It is the foundation of most ML loss functions.

The Big Idea: A Simple Example

The Bag of Balls

Imagine a bag with 3 balls. Each ball is either Red or Blue, but you do not know the combination. Let \theta = number of Blue balls. Possible values: 0, 1, 2, or 3.

Experiment: You draw 4 balls with replacement and observe: Blue, Red, Blue, Blue

Which hypothesis about \theta makes this outcome most probable?

\theta = 0 = 0P(data) = 0 (impossible)

\theta = 1 = 1/3P(data) = 2/81 = 0.025

\theta = 2 = 2/3P(data) = 8/81 = 0.099 (highest!)

\theta = 3 = 0P(data) = 0 (impossible)

MLE chooses \theta = 2 because it maximizes the probability of observing the data.

Likelihood vs. Probability

These terms sound interchangeable but have opposite meanings in statistics.

Probability P(x\mid\theta)

Fix the parameter, ask about data.

"If the coin is fair (\theta = 0.5 what is the probability of getting 7 heads in 10 flips?"

Likelihood L(\theta\mid x)

Fix the data, ask about parameters.

"I observed 7 heads in 10 flips. How likely is it that \theta = 0.5 How about \theta = 0.7

Key Insight

Likelihood is NOT a probability distribution over \theta It does not sum to 1 across all theta values. It is simply a function that tells us how "compatible" each theta is with our observed data.

Interactive: Visualizing the Likelihood Function

For the coin flip example, the likelihood function is L(p) = p^{k}(1 - p)^{n - k} where k = heads observed and n = total flips. Adjust the sliders to see how the likelihood curve changes.

Interactive Likelihood Function

Adjust the observed coin flips and watch the likelihood function change. The peak shows the MLE estimate.

Heads observed: 7

Total flips: 10

Observed Data

7H, 3T

MLE Estimate

p = 0.700

Max Likelihood

2.22e-3

The curve shows L(p) = p^7 * (1-p)^3. The peak at p = 0.70 is the Maximum Likelihood Estimate.

The Log-Likelihood Trick

With many observations, the likelihood becomes a product of many small numbers. This causes two problems:

Problem 1: Underflow

0.01 \times 0.01 \times 0.01 \times ... = 10^{- 200} which computers round to 0.

Problem 2: Derivatives

Taking derivatives of products requires the complex Product Rule repeatedly.

Solution: Take the natural log. Since log is monotonically increasing, the theta that maximizes L(theta) also maximizes log L(theta).

Log-Likelihood

\ell(\theta) = \ln L(\theta) = \sum_{i = 1}^{n}\ln f(x_{i};\theta)ℓ(θ)=lnL(θ)=∑i=1n​lnf(xi​;θ)

Products become sums. Sums are easy to differentiate.

Worked Example: Biased Coin

Observe n coin flips with k heads. What is the MLE for p (probability of heads)?

Step 1: Write the Likelihood

L(p) = p^{k}(1 - p)^{n - k}

Step 2: Take the Log

\ell(p) = k\ln(p) + (n - k)\ln(1 - p)ℓ(p)=kln(p)+(n−k)ln(1−p)

Step 3: Differentiate

\frac{d\ell}{dp} = \frac{k}{p} - \frac{n - k}{1 - p}

Step 4: Set to Zero and Solve

\left. \frac{k}{p} = \frac{n - k}{1 - p}\quad\Rightarrow\quad k(1 - p) = p(n - k)\quad\Rightarrow\quad k = np \right.

{\hat{p}}_{MLE} = \frac{k}{n}

The MLE for p is simply the observed proportion of heads. Intuitive!

Worked Example: Normal Distribution

Data x_{1},\ldots,x_{n} from N(\mu,\sigma^{2}) Estimate mu.

Step 1: Likelihood (PDF Product)

L(\mu) = \prod_{i = 1}^{n}\frac{1}{\sqrt{2\pi\sigma^{2}}}\exp\left( - \frac{(x_{i} - \mu)^{2}}{2\sigma^{2}} \right)

Step 2: Log-Likelihood

\ell(\mu) = - \frac{n}{2}\ln(2\pi\sigma^{2}) - \sum_{i = 1}^{n}\frac{(x_{i} - \mu)^{2}}{2\sigma^{2}}ℓ(μ)=−2n​ln(2πσ2)−∑i=1n​2σ2(xi​−μ)2​

Step 3: Differentiate w.r.t. \mu

First term is constant w.r.t. \mu disappears.

\frac{d\ell}{d\mu} = \frac{1}{\sigma^{2}}\sum(x_{i} - \mu)

Step 4: Solve

\left. \sum(x_{i} - \mu) = 0\quad\Rightarrow\quad\sum x_{i} = n\mu \right.

{\hat{\mu}}_{MLE} = \frac{1}{n}\sum x_{i} = \overset{ˉ}{x}

The MLE for the mean is the sample mean!

Why MLE Works: Key Properties

For large datasets, MLE is theoretically optimal. Here is why:

1. Consistency

As n approaches infinity, the estimate converges to the true parameter. More data = more accurate.

2. Efficiency

No other unbiased estimator has lower variance. MLE extracts maximum information from the data.

3. Invariance

If \hat{\theta} is MLE for \theta then g(\hat{\theta}) is MLE for g(\theta) Transformations are easy.

4. Asymptotic Normality

For large n, MLE follows a Normal distribution. This allows easy confidence interval construction.

Interactive: MLE Convergence

Watch how the MLE estimate converges to the true parameter as you increase sample size. This demonstrates the Consistency property in action.

MLE Convergence Simulator

Consistency Property: N → ∞ ⇒ θ̂ → θ

Samples0

Estimate0.0000

START SIMULATION

True Parameter (θ)0.50

0.10.9

MLE in Machine Learning

MLE is not just a statistical concept. It is the foundation of most ML loss functions!

MSE Loss = MLE for Gaussian

If we assume errors are normally distributed, minimizing negative log-likelihood gives:

- \ell(\mu) \propto \sum(x_{i} - \mu)^{2}

This is exactly Mean Squared Error! Linear regression minimizes MSE because it assumes Gaussian noise.

Cross-Entropy Loss = MLE for Bernoulli

For binary classification with predicted probability p:

- \ell(p) = - \lbrack y\ln(p) + (1 - y)\ln(1 - p)\rbrack

This is Binary Cross-Entropy! Logistic regression uses BCE because it models Bernoulli outcomes.

Softmax + Cross-Entropy = MLE for Categorical

For multi-class classification, minimizing categorical cross-entropy is equivalent to MLE assuming a Categorical distribution over classes.

Bottom Line

When you train a neural network by minimizing cross-entropy or MSE, you are performing MLE. The loss function encodes your assumption about the data distribution.

Limitations and the Bayesian Fix

MLE is powerful but has a critical weakness with small data.

The "Zero Count" Problem

Flip a coin 3 times, get 3 heads. MLE says: P(heads) = 1.0

This means MLE concludes tails is impossible. Obviously wrong!

MLE overfits to small samples because it only considers the data, with no prior beliefs.

The Fix: MAP (Maximum A Posteriori)

MAP adds a Prior distribution encoding our beliefs before seeing data:

{\hat{\theta}}_{MAP} = \arg{\max}_{\theta}\underset{\text{Likelihood}}{\underbrace{L(\theta)}} \cdot \underset{\text{Prior}}{\underbrace{P(\theta)}}

In ML, the Prior corresponds to Regularization:

• L2 regularization = Gaussian prior on weights
• L1 regularization = Laplace prior on weights

For a deeper dive, see Bayesian vs. Frequentist.