Thinking, Fast and Sluggish – By Daniel Kahneman – Book Review
In 2002, Daniel Kahneman won the Nobel in financial science. What made this uncommon is that Kahneman is a psychologist. Specifically, he is one-half of a pair of psychologists who, starting in the early Nineteen Seventies, set out to dismantle an entity long dear to economic theorists: that arch-rational resolution maker referred to as Homo economicus. The opposite half of the dismantling duo, Amos Tversky, died in 1996 at the age of 59. Had Tversky lived, he would definitely have shared the Nobel with Kahneman, his longtime collaborator and pricey friend.
Human irrationality is Kahneman’s great theme. There are basically three phases to his career. In the first, he and Tversky did a sequence of ingenious experiments that revealed 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 happen to be uncovered to. (In one experiment, for instance, experienced German judges have been inclined to present a shoplifter an extended sentence in the event that they had just rolled a pair of cube loaded to present a high number.) Within the second phase, Kahneman and Tversky showed that people making choices underneath uncertain circumstances do not behave in the way that financial models have traditionally assumed; they don’t “maximize utility.” The two then developed another account of decision making, one more trustworthy to human psychology, which they called “prospect theory.” (It was for this achievement that Kahneman was awarded the Nobel.) Within the third part of his profession, primarily after the death of Tversky, Kahneman has delved into “hedonic psychology”: the science of happiness, its nature and its causes. His findings in this area 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 is 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 collectively made us exceptionally affected person; it is much easier to attempt for perfection when you are by no means bored.”) So impressive is its vision of flawed human reason that the New York Instances columnist David Brooks just lately declared that Kahneman and Tversky’s work “will probably be remembered hundreds of years from now,” and that it’s “a crucial pivot point in the way we see ourselves.” They’re, Brooks stated, “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 consultants, are vulnerable to an exaggerated sense of how well we perceive the world — so Kahneman reminds us. Surely, he himself is alert to the perils of overconfidence. Regardless of all the cognitive biases, fallacies and illusions that he and Tversky (along with different researchers) purport to have discovered in the last few decades, he fights shy of the bold declare that humans are essentially irrational.
Or does he? “Most of us are wholesome most of the time, and most of our judgments and actions are appropriate more often than not,” Kahneman writes in his introduction. But, just a couple of pages later, he observes that the work he did with Tversky “challenged” the idea, orthodox among social scientists within the Seventies, that “people are typically rational.” The two psychologists discovered “systematic errors within the thinking fast and slow daniel kahneman of regular individuals”: errors arising not from the corrupting effects of emotion, however constructed into our developed cognitive machinery. Though Kahneman attracts only modest policy implications (e.g., contracts must be acknowledged in clearer language), others — maybe overconfidently? — go much further. Brooks, for example, has argued that Kahneman and Tversky’s work illustrates “the boundaries of social policy”; particularly, the folly of government action to battle joblessness and turn the financial system around.