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I saw this dictionary entry, and it says "discretion" could mean approximately either 1) the right to choose what to do or 2) the quality of being careful what you do.
The dictionary has these two example sentences illustrating those two senses:

  1. The coach used/exercised his own discretion to let the injured quarterback play. (for sense 1)
  2. He always uses care and discretion when dealing with others. (for sense 2)

Assuming "practice" (US verb) = "practise" (UK verb). If I write this:

He practices discretion when dealing with problems.

should "discretion" have the "right to choose" sense or the "being careful" sense? Or is it ambiguous?

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    That will be the "being careful" sense. – Hellion Nov 25 '13 at 21:54
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    They both carry the same basic sense of discernment or judgement which can be considered synonyms of the word. – user49727 Nov 25 '13 at 22:18
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They both carry the same basic sense of discernment or judgement which can be considered synonyms of the word.

Discretion derives from the Latin stem discrēt- meaning to separate or to divide - and therefore to discern (which is also derived from the common stem cernĕre (to separate)) - giving rise to two words in English which essentially mean the same (discreet and discrete). Thus, to be discrete means to separate or divide, which means to be discreet or to exercise discretion (discernment). The spelling discreet tends to be used more in a moral context with the second spelling discrete now more common in other contexts.

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Here are the two senses as defined in OED. The sense of "choice" is related to the English word discrete, while the sense of "care" is related to the English word discreet.

I. [ < ancient Latin sense of discrētio.] 4.a Liberty or power of deciding, or of acting according to one's own judgement or as one thinks fit; uncontrolled power of disposal.

III. [Compare discreet adj., adv., and n.] 6. a. Ability to discern or distinguish what is right, befitting, or advisable, esp. as regards one's own conduct or action; the quality of being discreet; discernment; prudence, sagacity, circumspection, sound judgement.

The example you give could be read either way. "Practice discretion" could be a euphemism for "act without consulting your supervisor" or it could mean simply that you are discreet.

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Lacking any overt reference to possession, which commonly accompanies "discretion" in the sense of choice ("one's own discretion," "my discretion," etc.), your final example is likelier to be understood in the sense of being careful.

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