Thinking Fast And Gradual - By Daniel Kahneman - Book Evaluation

In 2002, Daniel Kahneman gained the Nobel in financial science. What made this unusual is that Kahneman is a psychologist. Specifically, he is one-half of a pair of psychologists who, starting within the early Nineteen Seventies, got down to dismantle an entity long dear to financial theorists: that arch-rational decision maker often called Homo economicus. The opposite half of the dismantling duo, Amos Tversky, died in 1996 on the age of 59. Had Tversky lived, he would definitely have shared the Nobel with Kahneman, his longtime collaborator and expensive friend.

Human irrationality is Kahneman’s great theme. There are essentially three phases to his career. In the first, he and Tversky did a series of ingenious experiments that exposed twenty or so "cognitive biases" — unconscious errors of reasoning that distort our judgment of the world. Typical of these is the "anchoring effect": our tendency to be influenced by irrelevant numbers that we occur to be exposed to. (In a single experiment, for example, experienced German judges have been inclined to present a shoplifter a longer sentence in the event that they had just rolled a pair of cube loaded to present a high number.) In the second part, Kahneman and Tversky showed that individuals making selections below uncertain situations do not behave in the way that economic models have traditionally assumed; they don't "maximize utility." The 2 then developed an alternate account of decision making, one more faithful to human psychology, which they called "prospect theory." (It was for this achievement that Kahneman was awarded the Nobel.) Within the third phase of his career, mainly after the demise of Tversky, Kahneman has delved into "hedonic psychology": the science of happiness, its nature and its causes. His findings in this space have proved disquieting — and not just because one of many key experiments involved a deliberately extended colonoscopy.

"Thinking, Quick and Sluggish" spans all three of those phases. It's an astonishingly rich book: lucid, profound, filled with mental surprises and self-assist value. It is constantly entertaining and incessantly touching, particularly when Kahneman is recounting his collaboration with Tversky. ("The pleasure we found in working together made us exceptionally affected person; it is a lot easier to attempt for perfection when you are never bored.") So spectacular is its vision of flawed human reason that the New York Instances columnist David Brooks recently declared that Kahneman and Tversky’s work "will probably be remembered hundreds of years from now," and that it is "an important pivot point in the way in which we see ourselves." They're, Brooks said, "just like the Lewis and Clark of the mind."

Now, this worries me a bit. A leitmotif of this book is overconfidence. All of us, and especially experts, are liable to an exaggerated sense of how well we perceive the world — so Kahneman reminds us. Absolutely, he himself is alert to the perils of overconfidence. Regardless of all of the cognitive biases, fallacies and illusions that he and Tversky (along with other researchers) purport to have discovered in the previous couple of decades, he fights shy of the bold declare that humans are fundamentally irrational.

Or does he? "Most of us are wholesome more often than not, and most of our judgments and actions are appropriate more often than not," Kahneman writes in his introduction. Yet, just a few pages later, he observes that the work he did with Tversky "challenged" the idea, orthodox amongst social scientists within the Seventies, that "people are typically rational." The two psychologists discovered "systematic errors in the thinking fast and slow of normal folks": errors arising not from the corrupting effects of emotion, however constructed into our developed cognitive machinery. Although Kahneman attracts only modest policy implications (e.g., contracts must be stated in clearer language), others — maybe overconfidently? — go much further. Brooks, for example, has argued that Kahneman and Tversky’s work illustrates "the bounds of social policy"; particularly, the folly of government motion to struggle joblessness and turn the economic system around.