In most religions, the authority of God or a prophet, as revealed in scripture and interpreted by religious institutions, is the arbiter of what is true.
Buddhism presents a greater challenge: We are the arbiters of what is true. However, that doesn't mean that we can choose to believe whatever we like.
The Buddha's teachings on judging truth are found in the Kalama Sutta. The Kalama Sutta (or Sutra) is found in the oldest Buddhist scripture, the Tripitaka (in the Anguttara Nikaya, which is in the Sutra-pitaka). The Kalama Sutta has gained great favor in the West because of its advice to question authority and rely on oneself.
However, the Theravada scholar Bhikkhu Bodhi writes that this sutra is often misinterpreted. "Buddha has been made out to be a pragmatic empiricist who dismisses all doctrine and faith, and whose Dhamma is simply a freethinker's kit to truth which invites each one to accept and reject whatever he likes." Instead, the Buddha provides examples and a framework by which people can test teachings and judge their veracity.
Synopsis of the Kalama Sutta
The Buddha and several of his monks traveled through the Kosala country and entered a town of the Kalama people called Kesaputta. The Kamala people told the Buddha that many monks and brahmans had come to Kesaputta before him. Each of these religious men had expounded their own doctrines and reviled the doctrines of others. "Venerable sir," they asked the Buddha, "Which of these reverend monks and brahmans spoke the truth and which falsehood?"
Here the Buddha gave one of his most widely quoted teachings (Thanissaro Bhikkhu translation):
"Of course you are uncertain, Kalamas. Of course you are in doubt. When there are reasons for doubt, uncertainty is born. So in this case, Kalamas, don't go by reports, by legends, by traditions, by scripture, by logical conjecture, by inference, by analogies, by agreement through pondering views, by probability, or by the thought, 'This contemplative is our teacher.' When you know for yourselves that, 'These qualities are unskillful; these qualities are blameworthy; these qualities are criticized by the wise; these qualities, when adopted and carried out, lead to harm & to suffering' -- then you should abandon them."
By the same token, "When you know for yourselves that, 'These qualities are skillful; these qualities are blameless; these qualities are praised by the wise; these qualities, when adopted & carried out, lead to welfare and to happiness' -- then you should enter & remain in them."
By gently asking them questions, the Buddha guided the Kalamas to understand that teachings based in greed, hate and delusion are unskillful. Teachings absent of greed, hate and delusion are skillful. By applying these criteria, we can understand truth from falsehood.
Skillfulness and the Three Poisons
Greed, anger and ignorance are called the Three Poisons. The Buddha taught that when our actions are conditioned by the Three Poisons, the results will be harmful and lead to suffering, stress or disappointment (dukkha). So when we are making moral and ethical decisions, we first must examine ourselves and take care that we aren't in fact allowing ourselves to be jerked around by the Three Poisons.
Allowing the Three Poisons to steer our actions is called "unskillful," or in Sanskrit, akushala. Note that the word akushala is often translated into English as "evil." To do good, we cultivate generosity, loving kindness, and wisdom. Doing this is Right Effort.
The important point to remember here is that the Kalama Sutta is not a permission slip to do whatever feels good at the time. It challenges us to be deeply honest and pure of motivation. The teachings of most religions deny that such self-honesty and purity are possible, and thus they teach external authority is necessary.
Ignorance and Wisdom
It's important to be clear about what Buddhism means by "ignorance" and "wisdom." Ignorance is not a lack of information, and wisdom is not intelligence or knowledge. Wisdom, or prajna in Sanskrit, is the realization of things as they are. It is the understanding or discernment -- beyond mere cognitive knowledge -- of the Buddha's teaching, especially the teaching of anatta, no self.
At this point you may be grumbling that the Kalama Sutta says we don't have to believe in doctrines just because some teacher taught them, even if that teacher was the historical Buddha. And that's right; you don't have to believe anything just because it comes from authority. But if you are choosing to walk the Eightfold Path, you are working with Right View to thoroughly realize the teachings of the Four Noble Truths. This is what Buddhism is. This is what enlightenment is.
See also: "What do Buddhists believe?"
The Four Exalted Dwellings
The next part of the sutta explains the Four Exalted Dwellings: amity, compassion, gladness and equanimity (see also the Four Immeasurables). Those who reside in these dwellings will receive the Four Solaces:
"The disciple of the Noble Ones, Kalamas, who has such a hate-free mind, such a malice-free mind, such an undefiled mind, and such a purified mind, is one by whom four solaces are found here and now.
"'Suppose there is a hereafter and there is a fruit, result, of deeds done well or ill. Then it is possible that at the dissolution of the body after death, I shall arise in the heavenly world, which is possessed of the state of bliss.' This is the first solace found by him.
"'Suppose there is no hereafter and there is no fruit, no result, of deeds done well or ill. Yet in this world, here and now, free from hatred, free from malice, safe and sound, and happy, I keep myself.' This is the second solace found by him.
Notice he's not saying there is or is not an afterlife, just that skillful behavior will reward you whether there is an afterlife or not. The Buddha said we can also take solace in not causing evil to others and not bringing evil on oneself.
Again, the Kalama Sutta is not at all a permission slip to believe what you want and do what you like. It is, however, a logical argument that one can know the rightness or wrongness of actions by their effects and whether they bring you peace and happiness or stress and misery.