While the model is interesting, it is almost irremediably ruined by this line: "since by definition P(A) = Ta/n", which substantially conflates probability with frequency.
Think of P(A) merely as the output of a noiseless version of the same algorithm. Obviously this depends on the prior, but I think this one is not unreasonable in most cases.
I'm not sure I've understood the sentence
Think of P(A) merely as the output of a noiseless version of the same algorithm.
because P(A) is the noiseless parameter.
Anyway, the entire paper is based on the counting algorithm to establish that random noise can give rise to structured bias, and that this is a problem for a bayesian AI.
But while the mechanism can be an interesting and maybe even correct way to unify the mentioned bias in human mind, it can hardly be posed as a problem for such an artificial intelligence.
A counting algorithm for establishing ...
One of the more interesting papers at this year's AGI-12 conference was Finton Costello's Noisy Reasoners. I think it will be of interest to Less Wrong: