Obituary: Daniel Kahneman

Dan Kahneman died at 90. His 2011 book, Thinking, Fast and Slow, was a significant influence on how I understand people and politics. Fast refers to the unconscious mind and Slow to consciousness. Although he was a psychologist and not trained in economics, he won an economics Nobel Prize in 2002 for his Prospect Theory. That theory focuses on how humans make asymmetric decisions when facing risk, particularly financial risk. A core discovery was that pain comes more easily than pleasure, hence asymmetry in decision-making. 

 

Part of a NYT obituary comments:

As opposed to traditional economics, which assumes that human beings generally act in fully rational ways and that any exceptions tend to disappear as the stakes are raised, the behavioral school is based on exposing hard-wired mental biases that can warp judgment, often with counterintuitive results.

“His central message could not be more important,” the Harvard psychologist and author Steven Pinker told The Guardian in 2014, “namely, that human reason left to its own devices is apt to engage in a number of fallacies and systematic errors, so if we want to make better decisions in our personal lives and as a society, we ought to be aware of these biases and seek workarounds. That’s a powerful and important discovery.”

Professor Kahneman delighted in pointing out and explaining what he called universal brain “kinks.” The most important of these, the behaviorists hold, is loss-aversion: Why, for example, does the loss of $100 hurt about twice as much as the gaining of $100 brings pleasure? [an aspect of Prospect Theory]

Khaneman in 2002

If I recall right, during the 1967 war in Isreal, Khaneman flew back to Israel and volunteered for the Army. He was put to work as a psychologist to look for things that would help the Israeli military. He founded lots of improvements that are still in place. One was looking in Israeli army trash to find foods the soldiers liked and disliked. Disliked foods were in the garbage, but not foods the soldiers liked. The army changed its military rations after that.

Khaneman also looked at mistakes and successes that military officers and enlisted personnel made to see what individual traits correlated with success and failure among both groups. He came up with a questionnaire that was highly effective in spotting people who would be good as officers and ones who would not. My recollection is that his questionnaire or variants of it has been adopted by essentially all militaries in all or nearly all countries. 

After Prospect Theory came out, I recall seeing graphs of pain and pleasure being plotted based on empirical data of how humans actually respond to gains and losses. It was literally graphable on a piece of paper. The curve was not symmetrical. Pain counted for more than equal gain.

Khaneman was the real deal. He was a true expert, not a blowhard pretender.