Daniel Kahneman, the Eugene Higgins Professor of Psychology (Emeritus) at Princeton University and a Nobel Laureate in economics, died on March 27 at 90 years of age. He was widely credited for being one of the world’s foremost experts in decision making behavior, and his book “Thinking, Fast and Slow” is one of the bestselling non-fiction books of this century.
Prior to Kahneman’s work, the academic study of economics believed in the assumption that human beings behave as rational actors and have the ability to evaluate the implications and consequences of their choices and decisions clearly. Kahneman’s research proved that this was not always the case, and that instinct played a huge role in human decision making.
Kahneman’s work laid the foundation for the behavioral economics subdiscipline, and confirmed for many that economics is not just a science, but deeply connected to the nuances of the human psyche. Kahneman demonstrated that human beings are not purely rational creatures, but deeply instinctive ones, and that attempts to get human beings to behave rationally must require a keen awareness of the fallacies and systematic errors that we are prone to. People, and in turn, organizations, tend to make mistakes because decisions are based far too often on stereotypes and people’s own experiences, including beliefs and emotions, rather than on data.
The core thesis of ‘Thinking, Fast and Slow’ is that human decision making is governed by two systems – System 1 and 2. System 1 operates automatically and quickly, with little to no effort and no sense of voluntary control. System 2 allocates attention to the mental activities that demand it, including complex calculations and computations, and is able to function more rationally and analytically, correcting the errors made by System 1.
There are other, lesser well-known ideas from Kahneman’s work that psychologists are only now beginning to understand. Among these are the outrage heuristic and rhetorical asymmetry.
Kahneman was awarded the Nobel memorial prize in economic sciences in 2002 “for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty.”
Kahneman’s work in his later years concerned a form of psychological distortion that can be expressed as the difference between “experienced” and “remembered” wellbeing and happiness. He suggested that our recollection of remembered experiences was determined entirely by their peak and by their end, a finding he encapsulated in the “peak-end rule.”
Dr. Kahneman has been eulogized by his colleagues as one of the most important psychologists of the 20th century, with Dr. Eldar Shafir commemorating his contributions by claiming that “many areas in the social sciences simply have not been the same since he arrived on the scene. He will be greatly missed.”