IN TWO MINDS – REVIEW OF DANIEL KAHNEMAN’S “THINKING, FAST AND SLOW”

Having been influenced by the great Richard Feynman’s talks, I used to look upon psychologists with a certain disdain. Looking back, I think Feynman’s dislike of psychologists stemmed from the fact that they often tend to concentrate on the abnormal mind: hence such oddities like “Oedipus complex” and “Electra complex”.




But reading Daniel Kahneman’s Thinking, Fast and Slow (2011) I have revised my opinions. I look upon psychologists a lot more favourably. Kahneman, a Nobel laureate in economics, and his colleagues have done a lot of work mapping out the behavior of normal, healthy minds.

Kahneman begins the book by introducing the concept of two systems: System 1 and System 2. System 1 is to do with fast, intuitive thinking (“What is 2+2?”). System 2 is to do with slow, cognitive thinking (“What is 24 x 17?”). Both systems are essential for human survival. System 1 tends to jump to conclusions based on intuitive leaps and needs to be controlled and tempered by System 2. But sometimes System 2 tends to be lazy and is caught off guard and hence a person makes mistakes in thought.

An example of such a mistake is the substitution effect. When confronted with large complex questions, we tend to replace them with simpler questions and attempt to answer the simpler question. For instance, “How much would you contribute to save an endangered species?” can replaced by the heuristic question, “How much emotion do I feel when I think of dying dolphins?” The latter is simpler to answer than the former.

So how did a psychologist end up getting the Nobel Prize for economics? Kahneman’s work has helped refine the previously held picture of economic agents being completely rational. For instance, consider the following question:

Which do you prefer?
A. Toss a coin. If it comes up heads you win $100, and if it comes up tails you win nothing.
B. Get $46 for sure.

A completely rational economic agent would calculate the probabilities and take the first option. But a real human being would most probably opt for option (B). Kahneman, along with the late Amos Tversky, developed Prospect Theory which centered on loss aversion: the pleasure we get by gaining $100 is less than the pain we feel on losing the same amount. This concept of “loss aversion” is one of the most significant contributions of behavioral economics to mainstream economics.

I will stop here. Kahneman’s book deals with more intellectual treasures than I have covered in this short review. It needs to be read again and again to be savored to its fullest.