Sunday, December 11, 2011

Power Players: Daniel Kahneman

Most of us are probably familiar with behavioral economics, which studies how and why human behavior deviates from the assumptions held by classical economics (e.g. the rational actor). Probably fewer are familiar with Daniel Kahneman, the psychologist who, along with Amos Tversky, helped launch this interdisciplinary field. Despite having tremendous influence, most of his ideas have been interpreted and popularized by others. The demands of marketing and originality have thus built up a rather large corpus of Kahneman-boosting material, each highlighting a specific facet or application of his work. All the more enticing, then, when his first book for the lay public, Thinking, Fast and Slow, was released in late 2011.

Instead of simply identifying some small gap in the popular literature, Thinking, Fast and Slow is essentially a grand synthesis of behavioral psychology and economics: Nassim Taleb's focus on randomness and biases in epistemology (The Black Swan), Roy Baumeister's research into self-control (Willpower), Ian Ayres' thoughts on intuition and expertise (Super Crunchers), Cass Sunstein's theories on risk assessment (Risk and Reason), and Richard Thaler's conclusions about the normative implications for public policy (Nudge) all receive attention. Kahneman weaves these aspects together with storytelling, experimental accounts, and interactive games to articulate one simple theory: that human decisionmaking is governed by two systems, one fast, emotional, and unconscious, the other slow, calculating, and deliberate. Even with a high level of familiarity with these topics, Thinking, Fast and Slow is a great book to read, if only because it's written by the master himself. The few biographical bits scattered throughout the book are really interesting, describing Kahneman's work as a young psychologist working for the Israeli military.

Check out a great interview with Kahneman here, his fantastic TED Talk here, and a superb book review by the great Freeman Dyson here.

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