In The Will to Believe, James simply asserted that his will was free. As his first act of freedom, he said, he chose to believe his will was free. He was encouraged to do this by reading Charles Renouvier, whose work convinced James to convert from monism to pluralism. In his diary entry of April 30, 1870, James wrote,
I think that yesterday was a crisis in my life. I finished the first part of Renouvier's second Essais and see no reason why his definition of free will—"the sustaining of a thought because I choose to when I might have other thoughts"—need be the definition of an illusion. At any rate, I will assume for the present—until next year—that it is no illusion. My first act of free will shall be to believe in free will.
In 1884 James set the terms for all future discussions of determinism and compatibilism in the free will debates with his lecture to Harvard Divinity School students published as "The Dilemma of Determinism." In this talk he defined the common terms "hard determinism" and "soft determinism" (now more commonly called "compatibilism").
"Old-fashioned determinism was what we may call hard determinism. It did not shrink from such words as fatality, bondage of the will, necessitation, and the like. Nowadays, we have a soft determinism which abhors harsh words, and, repudiating fatality, necessity, and even predetermination, says that its real name is freedom; for freedom is only necessity understood, and bondage to the highest is identical with true freedom."
James called compatibilism a "quagmire of evasion," just as the ideas of Thomas Hobbes and David Hume — that free will was simply freedom from external coercion — were called a "wretched subterfuge" by Immanuel Kant.
James described chance as neither hard nor soft determinism, but "indeterminism". He said
"The stronghold of the determinist argument is the antipathy to the idea of chance...This notion of alternative possibility, this admission that any one of several things may come to pass is, after all, only a roundabout name for chance." 
James asked the students to consider his choice for walking home from Lowell Lecture Hall after his talk.
"What is meant by saying that my choice of which way to walk home after the lecture is ambiguous and matter of chance?...It means that both Divinity Avenue and Oxford Street are called but only one, and that one either one, shall be chosen."
With this simple example, James laid out a two-stage decision process with chance in a present time of random alternatives, leading to a choice of one possibility that transforms an ambiguous future into a simple unalterable past. James’ two-stage model separates chance (undetermined alternative possibilities) from choice (the free action of the individual, on which randomness has no effect). Subsequent thinkers using this model include Henri Poincaré, Arthur Holly Compton, and Karl Popper.