Thinking, Fast and Slow - Daniel Kahneman

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As we have seen, rationality is generally served by broader and more comprehensive frames, and joint evaluation is obviously broader than single evaluation. Of course, you should be wary of joint evaluation when someone who controls what you see has a vested interest in what you choose. Salespeople quickly learn that manipulation of the context in which customers see a good can profoundly influence preferences. Except for such cases of deliberate manipulation, there is a presumption that the comparative judgment, which necessarily involves System 2, is more likely to be stable than single evaluations, which often reflect the intensity of emotional responses of System 1. We would expect that any institution that wishes to elicit thoughtful judgments would seek to provide the judges with a broad context for the assessments of individual cases. I was surprised to learn from Cass Sunstein that jurors who are to assess punitive damages are explicitly prohibited from considering other cases. The legal system, contrary to psychological common sense, favors single evaluation. In another study of incoherence in the legal system, Sunstein compared the administrative punishments that can be imposed by different U.S. government agencies including the Occupational Safety and Health Administration and the Environmental Protection Agency. He concluded that “within categories, penalties seem extremely sensible, at least in the sense that the more serious harms are punished more severely. For occupational safety and health violations, the largest penalties are for repeated violations, the next largest for violations that are both willful and serious, and the least serious for failures to engage in the requisite recordkeeping.” It should not surprise you, however, that the size of penalties varied greatly across agencies, in a manner that reflected politics and history more than any global concern for fairness. The fine for a “serious violation” of the regulations concerning worker safety is capped at $7,000, while a vi Bmaknseflected polation of the Wild Bird Conservation Act can result in a fine of up to $25,000. The fines are sensible in the context of other penalties set by each agency, but they appear odd when compared to each other. As in the other examples in this chapter, you can see the absurdity only when the two cases are viewed together in a broad frame. The system of administrative penalties is coherent within agencies but incoherent globally. Speaking of Reversals “The BTU units meant nothing to me until I saw how much air-conditioning units vary. Joint evaluation was essential.” “You say this was an outstanding speech because you compared it to her other speeches. Compared to others, she was still inferior.”
“It is often the case that when you broaden the frame, you reach more reasonable decisions.” “When you see cases in isolation, you are likely to be guided by an emotional reaction of System 1.” Frames and Reality Italy and France competed in the 2006 final of the World Cup. The next two sentences both describe the outcome: “Italy won.” “France lost.” Do those statements have the same meaning? The answer depends entirely on what you mean by meaning. For the purpose of logical reasoning, the two descriptions of the outcome of the match are interchangeable because they designate the same state of the world. As philosophers say, their truth conditions are identical: if one of these sentences is true, then the other is true as well. This is how Econs understand things. Their beliefs and preferences are reality-bound. In particular, the objects of their choices are states of the world, which are not affected by the words chosen to describe them. There is another sense of meaning, in which “Italy won” and “France lost” do not have the same meaning at all. In this sense, the meaning of a sentence is what happens in your associative machinery while you understand it. The two sentences evoke markedly different associations. “Italy won” evokes thoughts of the Italian team and what it did to win. “France lost” evokes thoughts of the French team and what it did that caused it to lose, including the memorable head butt of an Italian player by the French star Zidane. In terms of the associations they bring to mind—how System 1 reacts to them—the two sentences really “mean” different things. The fact that logically equivalent statements evoke different reactions makes it impossible for Humans to be as reliably rational as Econs. Emotional Framing Amos and I applied the label of framing effects to the unjustified influences of formulation on beliefs an Con d preferences. This is one of the examples we used: Would you accept a gamble that offers a 10% chance to win $95 and a 90% chance to lose $5?
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A 1 E=mc 2 This eBook is provided b
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Contents Introduction Part I. Two S
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Part V. Two Selves 35. Two Selves 3
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So this is my aim for watercooler c
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participants in our experiments ign
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easy to identify a small change in
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From what we know about the accurac
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agents in classical economics and i
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Psychologists have been intensely i
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Brace for the starter gun in a race
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event is detected that violates the
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attention on a boring book, when we
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You have been invited to think of t
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Start beating a steady rhythm (or b
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main finding was that the ability t
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Another is the prefrontal area of t
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Accelerating beyond my strolling sp
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The list of indications of depletio
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answer have missed an obvious socia
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In one of the most famous experimen
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“Unfortunately, she tends to say
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notion that we have limited access
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Studies of priming effects have yie
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ox changed significantly. The poste
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strain is affected by both the curr
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legs in packages of four. System 2
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message want to stay away from anyt
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kadirga, saricik, biwonjni, nansoma
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These findings add to the growing e
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of circumstances, events, actions,
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understand that I mean a normal tab
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attributions: infants under one yea
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ut the middle items in both display
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Real evidence of generosity is miss
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This procedure makes good use of th
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WY SIATI to help explain a long and
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constantly evaluated as good or bad
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For another example, consider the q
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What level of income in your profes
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“The punishment won’t feel just
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How happy are you with your life th
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Figure 9 As printed on the page, is
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The results this time were complete
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“We are using last year’s perfo
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A study of the incidence of kidney
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Large samples are more precise than
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The message about the poll contains
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interviewing of the pilots should s
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“The sample of observations is to
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parent’s demand that it be played
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operation of System 1. Although I d
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Uses and Abuses of Anchors By now y
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“The firm we want to acquire sent
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A dramatic event temporarily increa
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instructed to contract the zygomati
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found it difficult to find eight in
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The most influential studies of ava
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Differences between experts and the
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actual damage to health appear not
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usiness administration computer sci
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You probably ranked computer scienc
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epresentativeness when we judge the
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laziness. Some people ignore base r
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“They keep making the same mistak
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In the language of this book, we ha
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Which alternative is more probable?
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Björn Borg was the dominant tennis
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information was laid out in front o
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85% of the cabs in the city are Gre
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Interest in cycling is widespread i
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not draw from base-rate information
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chosen another surprising psycholog
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officer in the room to turn his bac
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Now let us go against the time arro
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piano playing = age + weekly hours
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Our difficulties with the concept o
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“Perhaps his second interview was
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Intensity matching yields predictio
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their usual mission, which was to e
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A Defense of Extreme Predictions? I
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Perhaps the most valuable contribut
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Overconfidence The Illusion of Unde
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sentence about an intuition that tu
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Although hindsight and the outcome
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The basic message of Built to Last
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someone’s shoulders and jump acro
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In 1984, Amos and I and our friend
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Some years ago I had an unusual opp
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The idea that the future is unpredi
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Short-term trends can be forecast,
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unpredictability. We describe them
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the values to make them comparable
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Even after being informed that the
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only task was to elicit relevant fa
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Professional controversies bring ou
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Klein elaborated this description i
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Acquiring expertise in chess is har
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Feedback and Practice Some regulari
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It is difficult to reconstruct what
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within the optimistic consensus of
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about an individual case rarely fee
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The diagnosis of and the remedy for
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Seymour’s statistical summary. If
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The evidence suggests that an optim
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had failed. A common thread of bold
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The consequence of competition negl
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one’s self-image. In essence, the
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ut I can still recite its first sen
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most significant work we ever did,
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The expected value of the gamble an
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how the sure outcome differs from t
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for so long to see the obvious. Sti
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problem 4. Obviously, other example
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Loss Aversion Many of the options w
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Figure 10 shows an abrupt change in
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and the failure to acknowledge them
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Students learn in introductory econ
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Loss aversion implies only that cho
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would share a Nobel Prize many year
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The fundamental ideas of prospect t
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“He is a miser, and treats any do
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Page 246 and 247: Many of the messages that negotiato
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Page 254 and 255: Table 4 You can see that the decisi
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Page 262 and 263: People overestimate the probabiliti
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Page 266 and 267: The new hypothesis is that there wi
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Page 270 and 271: experiments on choice from experien
Page 272 and 273: combining the two decision problems
Page 274 and 275: You can see in the display that the
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Page 280 and 281: provide a strong incentive: realizi
Page 282 and 283: Regret is not the same as blame. Ot
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Page 300 and 301: If program B is adopted, there is a
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Page 308 and 309: Figure 15 When the procedure was ov
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Page 340 and 341: For an illustration of judgment by
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The illusion of validity. As we hav
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elementary demonstration of this ef
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imagine than unlikely ones; and tha
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event. The chain-like structure of
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lines or pages. Thus, people do not
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W. Edwards, “Conservatism in Huma
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Daniel Kahneman and Amos Tversky AB
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Figure 1. A Hypothetical Value Func
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If Program B is adopted, there is a
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same cd Cce f pattern of results wa
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In Figure 2, decision weights are l
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attractive if it is described as ef
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making, play a role analogous to th
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disadvantages as losses. Because lo
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The concepts of utility and value a
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McNeil, B., S. Pauker, H. Sox Jr.,
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editor could do as much as Eric did
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Us (New York: Guilford Press, 1999)
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working memory: Baddeley, Working M
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think with your body: Paula M. Nied
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engaged and analytic mode: Adam L.
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descriptions of two people: Solomon
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“Assimilation and Contrast Effect
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self-assessed contributions: Michae
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always weighted more: Jonathan St.
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inequality of income (measured by s
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outsiders, recruiting CEOs from com
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moderated by an arbiter: Mellers, H
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admiration of others: Entrepreneurs
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“history of one’s wealth”: Ot
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half of the tokens will change hand
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“acceptable/unacceptable”: Jos
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Samuel R. Gross and Kent D. Syverud
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“a sinking feeling”: Marcel Zee
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one embarrassing finding: Kuhn famo
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life as a whole these days: Another
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Los Angeles, Graduate School of Edu
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The index that appeared in the prin
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availability; affect and; and aware
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oken-leg rule budget forecasts Buil
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cognitive illusions; confusing expe
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default options denominator neglect
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Epley, Nick Epstein, Seymour equal-
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forecasts, see predictions and fore
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grades and grade point averages (GP
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inheritances injection puzzle In Se
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labor negotiations Lady Macbeth eff
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Mednick, Sarnoff Meehl, Paul meetin
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novelty Nudge (Thaler and Sunstein)
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t="-5%"> post-traumatic stress pove
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Rationality and the Reflective Mind
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Savage, Jimmie Save More Tomorrow S
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Steiger, James H. stereotypes; caus
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threats; possibility effect and 3-D
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wealth, see money and wealth weathe
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Grateful acknowledgment is made for
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Table of Contents Introduction 1. T
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Thank You W ant More Books? W e hop
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Thinking, Fast and Slow - Daniel Kahneman

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