Thank you for your thoughts, Dave. Kahnemanās (and Tverskyās) contributions to economics and decision making theory were transformational, and is fitting that āThinking, Fast and Slowā is on its way to becoming the best-selling economics book ever. It is a joy to teach with; I am surprised more universities donāt offer a course on decision making theory using this book as a basis, for it is hard to believe there could be a more useful skill in life than learning how to improve decision making in various circumstances. I wish I had read it forty years ago - life would have been quite different. Their 1979 paper on prospect theory must rank as one of the most skillfully designed papers ever as well, combining and extending simple experiments in different ways to convincingly reveal how the way people make decisions is quite different from the traditional understanding espoused by Bernoulli and Morganstern-Von Neumann. It is a paper of pure beauty.
In 2013 Barberis wrote a review for the Journal of Economic Perspectives wondering why it had taken so long for prospect theory to make a bigger splash in many fields of economics other than finance, especially macroeconomics. However, it seems that the profession is starting to make progress. The work of Benabou and Tirole examining motivated thinking suggests that in addition to being āwiredā in a manner that often leads to poor decisions, we also selectively ignore information that brings bad news that may threaten our core beliefs about who we are, what we want to achieve, and what we stand for. In a political setting it leads to pandering politicians offering soothing solutions, with occasional bursts of reform activity when things finally get too bad to ignore. In a group or corporate setting, this can lead to group think with occasional costly corporate disasters. So, while corporations often adopt rules that help as avoid bad decision making (eg about taking risky bets on financial markets when someone has lost money), they also can adopt procedures that lead to disaster because no-one wants to question the decisions people are making (and those people that do are excluded). This is fascinating work that seems to directly follow but extend Kahnemanās insights.
It is often said that in New Zealand large policy decisions are made in haste after 12 months intensive work, and then aggressively defended at leisure for 30 years. I am sure you can come up with some examples! Maybe finding a way to develop institutional processes that enable greater recognition of Kahneman's work about the way policy is developed and defended would be a good memorial project.
Did Barberis compare him against the speed by which the Nash equilibrium made its splash? It will be interesting to see how long we have to wait for Hollywood to make "A beautiful friendship"? about K&T š¤šš«”
NgÄ mihi nui! Either this is a big coincidence or you heard Cass Sunstein's guest lecture for The Treasury. Will you share your thoughts on Tversky next? š
Thank you for your thoughts, Dave. Kahnemanās (and Tverskyās) contributions to economics and decision making theory were transformational, and is fitting that āThinking, Fast and Slowā is on its way to becoming the best-selling economics book ever. It is a joy to teach with; I am surprised more universities donāt offer a course on decision making theory using this book as a basis, for it is hard to believe there could be a more useful skill in life than learning how to improve decision making in various circumstances. I wish I had read it forty years ago - life would have been quite different. Their 1979 paper on prospect theory must rank as one of the most skillfully designed papers ever as well, combining and extending simple experiments in different ways to convincingly reveal how the way people make decisions is quite different from the traditional understanding espoused by Bernoulli and Morganstern-Von Neumann. It is a paper of pure beauty.
In 2013 Barberis wrote a review for the Journal of Economic Perspectives wondering why it had taken so long for prospect theory to make a bigger splash in many fields of economics other than finance, especially macroeconomics. However, it seems that the profession is starting to make progress. The work of Benabou and Tirole examining motivated thinking suggests that in addition to being āwiredā in a manner that often leads to poor decisions, we also selectively ignore information that brings bad news that may threaten our core beliefs about who we are, what we want to achieve, and what we stand for. In a political setting it leads to pandering politicians offering soothing solutions, with occasional bursts of reform activity when things finally get too bad to ignore. In a group or corporate setting, this can lead to group think with occasional costly corporate disasters. So, while corporations often adopt rules that help as avoid bad decision making (eg about taking risky bets on financial markets when someone has lost money), they also can adopt procedures that lead to disaster because no-one wants to question the decisions people are making (and those people that do are excluded). This is fascinating work that seems to directly follow but extend Kahnemanās insights.
It is often said that in New Zealand large policy decisions are made in haste after 12 months intensive work, and then aggressively defended at leisure for 30 years. I am sure you can come up with some examples! Maybe finding a way to develop institutional processes that enable greater recognition of Kahneman's work about the way policy is developed and defended would be a good memorial project.
Andrew Coleman
Did Barberis compare him against the speed by which the Nash equilibrium made its splash? It will be interesting to see how long we have to wait for Hollywood to make "A beautiful friendship"? about K&T š¤šš«”
NgÄ mihi nui! Either this is a big coincidence or you heard Cass Sunstein's guest lecture for The Treasury. Will you share your thoughts on Tversky next? š
Thinking fast-slow has been the best book on economics & how human beings operate I have read. Daniel Kahneman is a huge loss to humanity