Thinking, Fast and Slow - Daniel Kahneman

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If Program B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved. (28%) Which of the two programs would you favor? The formulation of Problem 1 implicitly adopts as a reference point a state of affairs in which the disease is allowed to take its toll of 600 lives. The outcomes of the programs include the reference state and two possible gains, measured by the number of lives saved. As expected, preferences are risk averse: A clear majority of respondents prefer saving 200 lives for sure over a gamble that offers a one-third chance of saving 600 lives. Now consider another problem in which the same cover story is followed by a different description of the prospects associated with the two programs: Problem 2 (N = 155): If Program C is adopted, 400 people will die. (22%) If Program D is adopted, there is a one-third probability that nobody will die and a two-thirds probability that 600 people will die. (78%) It is easy to verify that options C and D in Problem 2 are undistinguishable in real terms from options A and B in Problem 1, respectively. The second version, however, assumes a reference state in which no one dies of the disease. The best outcome is the maintenance of this state and the alternatives are losses measured by the number of people that will die of the disease. People who evaluate options in these terms are expected to show a risk seeking preference for the gamble (option D) over the sure loss of 400 lives. Indeed, there is more risk seeking in the second version of the problem than there is risk aversion in the first. The failure of invariance is both pervasive and robust. It is as common among sophisticated respondents as among naive ones, and it is not eliminated even when the same respondents answer both questions within a few minutes. Respondents confronted with their conflicting answers are typically puzzled. Even after rereading the problems, they still wish to be risk averse in the “lives saved” version; they wish to be risk seeking in the “lives lost” version; and they also wish to obey invariance and give consistent answers in the two versions. In their stubborn appeal, framing effects resemble perceptual illusions more than computational errors. The following pair of problems elicits preferences that violate the dominance requirement of rational choice. Problem 3 (N = 86): Choose between:
E. 25% chance to win $240 and 75% chance to lose $760 (0%) F. 25% chance to win $250 and 75% chance to lose $750 (100%) It is easy to see that F dominates E. Indeed, all respondents chose accordingly. Problem 4 (N = 150): Imagine that you face the following pair of concurrent decisions. First examine both decisions, then indicate the options you prefer. Decision (i) Choose between: A. a sure gain of $240 (84%) B. 25% chance to gain $1,000 and 75% chance to gain nothing (16%) Decision (ii) Choose between: C. a sure loss of $750 (13%) D. 75% chance to lose $1,000 and 25% chance to lose nothing (87%) As expected from the previous analysis, a large majority of subjects made a risk averse choice for the sure gain over the positive gamble in the first decision, and an even larger majority of subjects made a risk seeking choice for the gamble over the sure loss in the second decision. In fact, 73% of the respondents chose A and D and only 3% chose B and C. The
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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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Some distinctions between good and
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Many of the messages that negotiato
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wage cut. The replacement worker ha
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The Fourfold Pattern Whenever you f
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probability leads to inconsistencie
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Table 4 You can see that the decisi
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Figure 13 The top row in each cel
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time to cut one’s losses. This is
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“We never let our vacations hang
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People overestimate the probabiliti
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depend only on probability, not on
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The new hypothesis is that there wi
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another: “1,000 Americans will di
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experiments on choice from experien
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combining the two decision problems
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You can see in the display that the
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detection. As expected, broad frami
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dollar, money is a proxy for points
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provide a strong incentive: realizi
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Regret is not the same as blame. Ot
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vaccine that is effective only befo
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with long-term consequences. Hindsi
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are absent, and of course WYSIATI.
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“How tall is John?” If John is
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the threat of skin cancer in farmwo
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As we have seen, rationality is gen
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Would you pay $5 to participate in
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thousands of such experiments, and
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If program B is adopted, there is a
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point, and they are not about the r
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large print, but the move is in the
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The term utility has had two distin
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Figure 15 When the procedure was ov
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Page 386 and 387: descriptions of two people: Solomon
Page 388 and 389: “Assimilation and Contrast Effect
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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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