Daniel Kahneman

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Daniel Kahneman
Daniel KAHNEMAN.jpg
Kahneman In 2004
Born (1934-03-05) March 5, 1934 (age 86) [1]
Nationality United States, Israel
Education Hebrew University (BA)
University of California, Berkeley (MA, PhD)
Known for Cognitive biases
Behavioral economics
Prospect theory
Loss aversion
Spouse(s)Ira Kahneman; Anne Treisman (1978–2018, her death)
Awards APA Lifetime Achievement Award (2007)
Nobel Memorial Prize in Economic Sciences (2002)
Tufts University Leontief Prize (2010)
APS Distinguished Scientific Contribution Award (1982)
University of Louisville Grawemeyer Award (2003)
Scientific career
Fields Psychology, economics
Institutions Princeton University 1993–
University of California, Berkeley 1986–93
University of British Columbia 1978–86
Center for Advanced Study in the Behavioral Sciences 1972–73
Hebrew University of Jerusalem 1961–77
Thesis An analytical model of the semantic differential  (1961)
Doctoral advisor Susan M. Ervin-Tripp
Doctoral students
Anat Ninio
Avishai Henik
Baruch Fischhoff
Ziv Carmon
Website scholar.princeton.edu/kahneman/

Daniel Kahneman ( /ˈkɑːnəmən/ ; Hebrew : דניאל כהנמן; born March 5, 1934) is an Israeli psychologist and economist notable for his work on the psychology of judgment and decision-making, as well as behavioral economics, for which he was awarded the 2002 Nobel Memorial Prize in Economic Sciences (shared with Vernon L. Smith). His empirical findings challenge the assumption of human rationality prevailing in modern economic theory.

Contents

With Amos Tversky and others, Kahneman established a cognitive basis for common human errors that arise from heuristics and biases (Kahneman & Tversky, 1973; Kahneman, Slovic & Tversky, 1982; Tversky & Kahneman, 1974), and developed prospect theory (Kahneman & Tversky, 1979).

In 2011, he was named by Foreign Policy magazine in its list of top global thinkers. [2] In the same year, his book Thinking, Fast and Slow , which summarizes much of his research, was published and became a best seller. [3] In 2015, The Economist listed him as the seventh most influential economist in the world. [4]

He is professor emeritus of psychology and public affairs at Princeton University's Princeton School of Public and International Affairs. Kahneman is a founding partner of TGG Group, a business and philanthropy consulting company. He was married to cognitive psychologist and Royal Society Fellow Anne Treisman, who died in 2018. [5]

Early life

Daniel Kahneman was born in Tel Aviv, Mandatory Palestine in 1934, where his mother, Rachel, was visiting relatives. He spent his childhood years in Paris, France, where his parents had emigrated from Lithuania in the early 1920s. Kahneman and his family were in Paris when it was occupied by Nazi Germany in 1940. His father, Efrayim, was picked up in the first major round-up of French Jews, but he was released after six weeks due to the intervention of his employer, Eugène Schueller. [6] :52 The family was on the run for the remainder of the war, and survived, except for the death of Kahneman's father due to diabetes in 1944. Kahneman and his family then moved to British Mandatory Palestine in 1948, just before the creation of the state of Israel (Kahneman, 2003).

Kahneman has written of his experience in Nazi-occupied France, explaining in part why he entered the field of psychology:

It must have been late 1941 or early 1942. Jews were required to wear the Star of David and to obey a 6 p.m. curfew. I had gone to play with a Christian friend and had stayed too late. I turned my brown sweater inside out to walk the few blocks home. As I was walking down an empty street, I saw a German soldier approaching. He was wearing the black uniform that I had been told to fear more than others – the one worn by specially recruited SS soldiers. As I came closer to him, trying to walk fast, I noticed that he was looking at me intently. Then he beckoned me over, picked me up, and hugged me. I was terrified that he would notice the star inside my sweater. He was speaking to me with great emotion, in German. When he put me down, he opened his wallet, showed me a picture of a boy, and gave me some money. I went home more certain than ever that my mother was right: people were endlessly complicated and interesting. (Kahneman, 2003, p. 417)

Education and early career

Kahneman received his bachelor of science degree with a major in psychology, and a minor in mathematics from the Hebrew University of Jerusalem in 1954.

He served in the psychology department of the Israeli Defense Forces. One of his responsibilities was to evaluate candidates for officer's training school, and to develop tests and measures for this purpose.

In 1958, he went to the United States to study for his PhD in Psychology from the University of California, Berkeley. His 1961 dissertation, advised by Susan Ervin, examined relations between adjectives in the semantic differential and "allowed me to engage in two of my favorite pursuits: the analysis of complex correlational structures and FORTRAN programming," as he would later recall. [5]

Academic career

Cognitive psychology

Kahneman began his academic career as a lecturer in psychology at the Hebrew University of Jerusalem in 1961. [5] He was promoted to senior lecturer in 1966. His early work focused on visual perception and attention. For example, his first publication in the prestigious journal Science was entitled "Pupil Diameter and Load on Memory" (Kahneman & Beatty, 1966). During this period, Kahneman was a visiting scientist at the University of Michigan (1965–66) and the Applied Psychology Research Unit in Cambridge (1968/1969, summers). He was a fellow at the Center for Cognitive Studies, and a lecturer in cognitive psychology at Harvard University in 1966/1967.

Judgment and decision-making

This period marks the beginning of Kahneman's lengthy collaboration with Amos Tversky. Together, Kahneman and Tversky published a series of seminal articles in the general field of judgment and decision-making, culminating in the publication of their prospect theory in 1979 (Kahneman & Tversky, 1979). Following this, the pair teamed with Paul Slovic to edit a compilation entitled "Judgement Under Uncertainty: Heuristics and Biases" (1982) that proved to be an important summary of their work and of other recent advances that had influenced their thinking. Kahneman was ultimately awarded the Nobel Memorial Prize in Economics in 2002 for his work on prospect theory.

In his Nobel biography, Kahneman states that his collaboration with Tversky began after Kahneman had invited Tversky to give a guest lecture to one of Kahneman's seminars at Hebrew University in 1968 or 1969. [5] Their first jointly written paper, "Belief in the Law of Small Numbers," was published in 1971 (Tversky & Kahneman, 1971). They published seven articles in peer-reviewed journals in the years 1971–1979. Aside from "Prospect Theory," the most important of these articles was "Judgment Under Uncertainty: Heuristics and Biases" (Tversky & Kahneman, 1974), which was published in the prestigious journal Science and introduced the notion of anchoring.

Kahneman left Hebrew University in 1978 to take a position at the University of British Columbia. [5]

Behavioral economics

Kahneman and Tversky were both fellows at the Center for Advanced Study in the Behavioral Sciences at Stanford University in the academic year 1977–1978. A young economist named Richard Thaler was a visiting professor at the Stanford branch of the National Bureau of Economic Research during that same year. According to Kahneman, "[Thaler and I] soon became friends, and have ever since had a considerable influence on each other's thinking" (Kahneman, 2003, p. 437). Building on prospect theory and Kahneman and Tversky's body of work, Thaler published "Toward a Positive Theory of Consumer Choice" in 1980, a paper which Kahneman has called "the founding text in behavioral economics" (Kahneman, 2003, p. 438).

Kahneman and Tversky became heavily involved in the development of this new approach to economic theory, and their involvement in this movement had the effect of reducing the intensity and exclusivity of their earlier period of joint collaboration. They would continue to publish together until the end of Tversky's life, but the period when Kahneman published almost exclusively with Tversky ended in 1983, when he published two papers with Anne Treisman, his wife since 1978.

Hedonic psychology

In the 1990s, Kahneman's research focus began to gradually shift in emphasis towards hedonic psychology.

According to Kahneman and colleagues,

Hedonic psychology...is the study of what makes experiences and life pleasant or unpleasant. It is concerned with feelings of pleasure and pain, of interest and boredom, of joy and sorrow, and of satisfaction and dissatisfaction. It is also concerned with the whole range of circumstances, from the biological to the societal, that occasion suffering and enjoyment. [7]

(This subfield is closely related to the positive psychology movement, which was steadily gaining in popularity at the time.)

It is difficult to determine precisely when Kahneman's research began to focus on hedonics, although it likely stemmed from his work on the economic notion of utility. After publishing multiple articles and chapters in all but one of the years spanning the period 1979–1986 (for a total of 23 published works in 8 years), Kahneman published exactly one chapter during the years 1987–1989. After this hiatus, articles on utility and the psychology of utility began to appear (e.g., Kahneman & Snell, 1990; Kahneman & Thaler, 1991; Kahneman & Varey, 1991).

In 1992, Varey and Kahneman introduced the method of evaluating moments and episodes as a way to capture "experiences extended across time". While Kahneman continued to study decision-making (e.g., Kahneman, 1992, 1994; Kahneman & Lovallo, 1993), hedonic psychology was the focus of an increasing number of publications (e.g., Fredrickson & Kahneman, 1993; Kahneman, Fredrickson, Schreiber & Redelemeier, 1993; Kahneman, Wakker & Sarin, 1997; Redelmeier & Kahneman, 1996), culminating in a volume co-edited with Ed Diener and Norbert Schwarz, scholars of affect and well-being. [8]

Focusing illusion

With David Schkade, Kahneman developed the notion of the focusing illusion (Kahneman & Schkade, 1998; Kahneman, Krueger, Schkade, Schwarz & Stone, 2006) to explain in part the mistakes people make when estimating the effects of different scenarios on their future happiness (also known as affective forecasting, which has been studied extensively by Daniel Gilbert). The "illusion" occurs when people consider the impact of one specific factor on their overall happiness, they tend to greatly exaggerate the importance of that factor, while overlooking the numerous other factors that would in most cases have a greater impact.

A good example is provided by Kahneman and Schkade's 1998 paper "Does living in California make people happy? A focusing illusion in judgments of life satisfaction". In that paper, students in the Midwest and in California reported similar levels of life satisfaction, but the Midwesterners thought their Californian peers would be happier. The only distinguishing information the Midwestern students had when making these judgments was the fact that their hypothetical peers lived in California. Thus, they "focused" on this distinction, thereby overestimating the effect of the weather in California on its residents' satisfaction with life.

Happiness and life satisfaction

Kahneman has defined happiness as "what I experience here and now", [9] but said that in reality humans pursue life satisfaction, which “is connected to a large degree to social yardsticks–achieving goals, meeting expectations. [10] [11]

He has contrasted what people experience in the moment with how they later remember experiences. [12] [13]

Teaching

Kahneman is a senior scholar and faculty member emeritus at Princeton University's Department of Psychology and Princeton School of Public and International Affairs. He is also a fellow at Hebrew University and a Gallup Senior Scientist. [14]

Personal life

Kahneman's first wife was Irah Kahneman, [15] an Israeli educational psychologist, with whom he had two children. His second wife was the cognitive psychologist Anne Treisman from 1978 until her death in 2018. As of 2014, they lived part-time in Berkeley, California. [16] [17] Kahneman has been described as a Jewish atheist. [18]

In 2015 Kahneman described himself as a very hard worker, as “a worrier” and “not a jolly person”. But, despite this, he said, “I’m quite capable of great enjoyment, and I’ve had a great life.” [19]

Awards and recognition

Notable contributions

Published works

The following is a partial list of publications.

Books

Interviews

Radio interviews

Online interviews

Television interviews

Bibliography

See also

Related Research Articles

A cognitive bias is a systematic pattern of deviation from norm or rationality in judgment. Individuals create their own "subjective reality" from their perception of the input. An individual's construction of reality, not the objective input, may dictate their behavior in the world. Thus, cognitive biases may sometimes lead to perceptual distortion, inaccurate judgment, illogical interpretation, or what is broadly called irrationality.

A heuristictechnique, or a heuristic, is any approach to problem solving or self-discovery that employs a practical method that is not guaranteed to be optimal, perfect, or rational, but is nevertheless sufficient for reaching an immediate, short-term goal or approximation. Where finding an optimal solution is impossible or impractical, heuristic methods can be used to speed up the process of finding a satisfactory solution. Heuristics can be mental shortcuts that ease the cognitive load of making a decision.

Bounded rationality is the idea that rationality is limited, when individuals make decisions, by the tractability of the decision problem, the cognitive limitations of the mind, and the time available to make the decision. Decision-makers, in this view, act as satisficers, seeking a satisfactory solution rather than an optimal one. Therefore, humans do not undertake a full cost-benefit analysis to determine the optimal decision, rather they choose an option that fulfils their adequacy criterion.

Amos Tversky

Amos Nathan Tversky was an Israeli cognitive and mathematical psychologist, a student of cognitive science, a collaborator of Daniel Kahneman, and a key figure in the discovery of systematic human cognitive bias and handling of risk.

Behavioral economics Academic discipline

Behavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals and institutions and how those decisions vary from those implied by classical economic theory.

Prospect theory

Prospect theory is a theory of behavioral economics and behavioral finance that was developed by Daniel Kahneman and Amos Tversky in 1979. The theory was cited in the decision to award Kahneman the 2002 Nobel Memorial Prize in Economics.

The representativeness heuristic is used when making judgments about the probability of an event under uncertainty. It is one of a group of heuristics proposed by psychologists Amos Tversky and Daniel Kahneman in the early 1970s as "the degree to which [an event] (i) is similar in essential characteristics to its parent population, and (ii) reflects the salient features of the process by which it is generated". Heuristics are described as "judgmental shortcuts that generally get us where we need to go – and quickly – but at the cost of occasionally sending us off course." Heuristics are useful because they use effort-reduction and simplification in decision-making.

Richard Thaler

Richard H. Thaler is an American economist and the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business. In 2015, Thaler was president of the American Economic Association.

Gerd Gigerenzer German cognitive psychologist

Gerd Gigerenzer is a German psychologist who has studied the use of bounded rationality and heuristics in decision making. Gigerenzer is director emeritus of the Center for Adaptive Behavior and Cognition (ABC) at the Max Planck Institute for Human Development and director of the Harding Center for Risk Literacy, both in Berlin, Germany.

Simulation heuristic

The simulation heuristic is a psychological heuristic, or simplified mental strategy, according to which people determine the likelihood of an event based on how easy it is to picture the event mentally. Partially as a result, people experience more regret over outcomes that are easier to imagine, such as "near misses". The simulation heuristic was first theorized by psychologists Daniel Kahneman and Amos Tversky as a specialized adaptation of the availability heuristic to explain counterfactual thinking and regret. However, it is not the same as the availability heuristic. Specifically the simulation heuristic is defined as "how perceivers tend to substitute normal antecedent events for exceptional ones in psychologically 'undoing' this specific outcome."

In psychology, the human mind is considered to be a cognitive miser due to the tendency of people to think and solve problems in simpler and less effortful ways rather than in more sophisticated and more effortful ways, regardless of intelligence. Just as a miser seeks to avoid spending money, the human mind often seeks to avoid spending cognitive effort. The cognitive miser theory is an umbrella theory of cognition that brings together previous research on heuristics and attributional biases to explain how and why people are cognitive misers.

Reference class forecasting or comparison class forecasting is a method of predicting the future by looking at similar past situations and their outcomes. The theories behind reference class forecasting were developed by Daniel Kahneman and Amos Tversky. The theoretical work helped Kahneman win the Nobel Prize in Economics.

Hersh Shefrin is a Canadian economist best known for his pioneering work in behavioral finance.

Attribute substitution, also known as substitution bias, is a psychological process thought to underlie a number of cognitive biases and perceptual illusions. It occurs when an individual has to make a judgment that is computationally complex, and instead substitutes a more easily calculated heuristic attribute. This substitution is thought of as taking place in the automatic intuitive judgment system, rather than the more self-aware reflective system. Hence, when someone tries to answer a difficult question, they may actually answer a related but different question, without realizing that a substitution has taken place. This explains why individuals can be unaware of their own biases, and why biases persist even when the subject is made aware of them. It also explains why human judgments often fail to show regression toward the mean.

Heuristics are simple strategies or mental processes that humans, animals, organizations and machines use to quickly form judgments, make decisions, and find solutions to complex problems. This happens when an individual focuses on the most relevant aspects of a problem or situation to formulate a solution.

<i>Thinking, Fast and Slow</i>

Thinking, Fast and Slow is a best-selling book published during 2011 by Nobel Memorial Prize in Economic Sciences laureate Daniel Kahneman. It was the 2012 winner of the National Academies Communication Award for best creative work that helps the public understanding of topics of behavioral science, engineering and medicine.

<i>The Undoing Project</i>

The Undoing Project: A Friendship That Changed Our Minds is a 2016 nonfiction book by American author Michael Lewis, published by W.W. Norton. The Undoing Project explores the close partnership of Israeli psychologists Daniel Kahneman and Amos Tversky, whose work on heuristics in judgment and decision-making demonstrated common errors of the human psyche, and how that partnership eventually broke apart. The book revisits Lewis' interest in market inefficiencies, previously explored in his books Moneyball (2003), The Big Short (2010), and Flash Boys (2014). It was acclaimed by book critics.

David Gal is Professor of Marketing at the University of Illinois at Chicago. He is best known for his critiques of behavioral economics, and in particular his critique of the behavioral economics concept of loss aversion. His forthcoming book is titled The Power of the Status Quo.

References

  1. "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2002". NobelPrize.org.
  2. "The FP Top 100 Global Thinkers. 71 Daniel Kahneman". foreignpolicy.com. November 28, 2011. Retrieved November 3, 2012.
  3. "The New York Times Best Seller List – December 25, 2011" (PDF). www.hawes.com. Retrieved August 17, 2014.
  4. "Influential economists – That ranking". economist.com. The Economist. January 2, 2015. Retrieved April 4, 2015.
  5. 1 2 3 4 5 Kahneman, Daniel (2002). "Autobiography". nobelprize.org . Retrieved May 1, 2017.
  6. Lewis, Michael (2017) [1st pub. in the USA by W.W. Norton & Company, Inc, 2016]. The Undoing Project: A Friendship That Changed Our Minds . New York: Penguin Random House. ISBN   978-0-14-198304-2.
  7. Kahneman, Diener & Schwarz 1999, p. ix.
  8. Kahneman, Diener & Schwarz 1999.
  9. "People don’t want to be happy the way I’ve defined the term – what I experience here and now. In my view, it’s much more important for them to be satisfied, to experience life satisfaction, from the perspective of ‘What I remember,’ of the story they tell about their lives."https://www.haaretz.com/israel-news/.premium.MAGAZINE-why-nobel-prize-winner-daniel-kahneman-gave-up-on-happiness-1.6528513 Archived 2018-10-08 at the Wayback Machine
  10. Mandel, Amir (October 7, 2018). "Why Nobel Prize Winner Daniel Kahneman Gave Up on Happiness" via Haaretz.
  11. Livni, Ephrat. "A Nobel Prize-winning psychologist says most people don't really want to be happy". Quartz.
  12. https://www.psychologicalscience.org/observer/memory-vs-experience-happiness-is-relative#:~:text=The%20contrast%20between%20remembered%20and,gets%20to%20keep%20the%20memories.
  13. Lex Fridman Podcast #65 – Daniel Kahneman: Thinking Fast and Slow, Deep Learning, and AI (2020)
  14. "Daniel Kahneman, Ph.D." The Gallup Organization. 2012. Archived from the original on November 3, 2012. Retrieved November 3, 2012.
  15. "Daniel Kahneman Facts". In January of 1958, my wife, Irah, and I landed at the San Francisco airport, where the now famous sociologist Amitai Etzioni was waiting to take us to Berkeley, to the Flamingo Motel on University Avenue, and to the beginning of our graduate careers.
  16. "How do we really make decisions?". Horizon. Series 2013-2014. Episode 9. February 24, 2014. Event occurs at 00:20:13. BBC. BBC Two . Retrieved February 19, 2019. I live in Berkeley during summers and I walk a lot.Cite has empty unknown parameter: |city= (help)
  17. Shariatmadari, David (July 15, 2015). "A life in ... Interview Daniel Kahneman: 'What would I eliminate if I had a magic wand? Overconfidence'". The Guardian . He has been married since 1978 to the perceptual psychologist Anne Treisman.
  18. Engber, Daniel (December 21, 2016). "How a Pioneer in the Science of Mistakes Ended Up Mistaken". Slate Magazine . It’s a portrait of besotted opposites: Both Kahneman and Tversky were brilliant scientists, and atheist Israeli Jews...
  19. https://amp.theguardian.com/books/2015/jul/18/daniel-kahneman-books-interview
  20. "Daniel Kahneman". www.nasonline.org.
  21. "2003- Daniel Kahneman and Amos Tversky". Archived from the original on July 23, 2015.
  22. Cynkar, Amy (April 4, 2007). "A towering figure". Monitor on Psychology. American Psychological Association . Retrieved November 26, 2008. Daniel Kahneman will receive APA’s lifetime contributions award at convention for his work challenging human rationality and decision-making.
  23. "Daniel Kahneman". Erasmus University Rotterdam. Archived from the original on January 7, 2013. Retrieved November 3, 2012.
  24. "The 50 Most Influential People in Global Finance". Bloomberg L.P. Archived from the original on July 16, 2012. Retrieved November 3, 2012.
  25. "Talcott Parsons Prize Ceremony and Address: Two Systems in the Mind". American Academy of Arts and Sciences. November 9, 2011. Archived from the original on October 31, 2012. Retrieved November 3, 2012.
  26. "Alex Shakar, Stephen King win Times Book Prizes". LA Times . Tribune Company. April 20, 2012. Retrieved November 3, 2012.
  27. "And the Winners Are …". Keck Futures Initiative. National Academy of Sciences. October 12, 2012. Retrieved June 24, 2013. An outstanding and accessible book that brings to the public key scientific insights about how we think and make decisions.
  28. "His Excellency Dr. Daniel Kahneman". www.racef.es. June 14, 2012. Retrieved November 2, 2012.
  29. "President Obama Names Presidential Medal of Freedom Recipients". Office of the Press Secretary, The White House. August 8, 2013. Retrieved August 8, 2013.
  30. McGill to award 16 honorary degrees : McGill Reporter
  31. "Gold Medal Honorees". The National Institute of Social Sciences.
  32. "Golden Plate Awardees of the American Academy of Achievement". www.achievement.org. American Academy of Achievement.
  33. "2019 Summit Highlights Photo: Anthony D. Romero, Executive Director of the American Civil Liberties Union, presenting the Golden Plate Award to Dr. Daniel Kahneman, a recipient of the Nobel Prize in Economics, at the 2019 International Achievement Summit". American Academy of Achievement.

Further reading

Awards
Preceded by
George A. Akerlof
A. Michael Spence
Joseph E. Stiglitz
Laureate of the Nobel Memorial Prize in Economics
2002
Served alongside: Vernon L. Smith
Succeeded by
Robert F. Engle III
Clive W.J. Granger