By many accounts, Daniel Kahneman is the father of his field, Behavioral Economics, which is a mix between behavioral psychology and traditional economics and has provided perhaps the most fascinating material in recent pop science literature. While this book is no exception in that regard, it is plagued by the same deficiencies that other Behavioral Economics books are plagued by, and so doesn’t quite accomplish the potential of the new science.
The premise behind Behavioral Economics is that people are irrational. Countering the standard of the ‘rational agent model’, in which it is assumed that people think and act rationally based on their own interests, behavioral economists have shown that people consistently make decisions that are uneconomical and often self-defeating. The conclusion is that people cannot possibly be rational and that something else is going on.
Daniel Kahneman’s thesis is that everyone possesses two systems of thought–the first is automatic, emotional, and intuitive (‘fast’ as he summarizes it); the second is deliberate, logical, and controlled (‘slow’). This dichotomy means that we have the capacity for both reasoning and emotional functions; it also means that we are prone to mistakes. Kahneman shows how the two systems of thought are engaged and what happens when the two mix. Kahneman argues that we define ourselves by our ‘System 2’ slow thinking, but in reality, we are largely governed by our ‘System 1’ fast thinking. This is where a number of cognitive biases and errors come in.
Kahneman’s work on these biases is legendary. As a part of a pioneering duo with Amos Tversky, he laid out a number of experiments that show how people consistently make faulty errors in all kinds of situations–at the grocery store, in the classroom, at the voting booth, etc. It is from these studies and other similar work that pop psychology issues such as ‘anchoring’, ‘framing’, ‘loss aversion’, ‘hindisght bias’, and others were introduced. Now–thanks in large part to Kahneman and this book–they are part of our everyday conversations.
Kahneman covers all of these concepts in this book, and does so par excellence since he has had such an integral part in forming them. And, the material is as fascinating as it is in any other Behavioral Economics book. But, as it is with other Behavioral Economics books, the argument is contingent on a number of premises that cannot be assumed, and so conclusions reached end up being far-fetched and rather illogical in themselves.
To begin, the theory has holes. It is argued that, since System 2 is where we conduct our rational choices, System 1 must therefore be non-rational or irrational. And, since we are largely governed by System 1, our actions are based on non-rational processes. But Kahneman does not explain how the different systems arise, nor does he examine what the systems are made up of; he simply shows that people think and make decisions in two different manners. Here, Kahneman shows that System 1 is quick and based on limited information, but this doesn’t mean that it is irrational–impetuous and uninformed, maybe, but it still can be based in logic.
One would be right to question the method as well. Kahneman’s research is largely based in thought experiments, psychological experiments, and surveys. While this doesn’t mean that his conclusions are automatically false, it does mean that his findings are limited–a fact that he fails to guard against.
For example, throughout the book Kahneman would examine an experiment, determining that a group of people acted a certain way under certain circumstances, and then claim that the findings apply to everyone including the reader. An experiment described early in the book showed how a group of people were less helpful on average after being ‘primed’ by the concept of money. Kahneman then says “You have no choice but to accept that the major conclusions of these studies are true. More important, you must accept that they are true about you. If you had been exposed to a screen saver of floating dollar bills, you too would likely have picked up fewer pencils to help a clumsy stranger.” But this is a simple whole-to-part fallacy. Kahneman argues that because a group of people was influenced by a certain prime that all people would be influenced by that same prime. The claim cannot be logically defended–there are exceptions to all of these rules, and so the conclusion cannot be so absolute.
All of the studies and conclusions in this book are subject to similar criticism. This doesn’t make the studies uninteresting or banal in any way. On the contrary, the material is that much more interesting when the reader realizes that there is something missing in the analysis. The intellectual agitation encourages a rebuttal in long form, which is on its way. In the meantime, enjoy this survey of some of the most fascinating material on human behavior.
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