In 2002, Daniel Kahneman won the Nobel Prize in Economics, which isn’t all that unusual until one realizes that Kahneman isn’t an economist at all, but rather a psychologist. The reason that Kahneman won the Nobel is because he has dedicated his life (along with his partner Amos Tversky) to attempting to disprove the rational agent model that is a major underlying assumption of modern economics. The rational agent assumption assumes that all people are entirely rational and make the decisions that maximize utility for them (the people in this case are popularly called Homo Economis). Kahnemen thinks this isn’t true due to innate biases inside people and lays out why in Thinking Fast and Slow, which is an overview of his life’s work.

The basic premise of Thinking Fast and Slow is that humans think in two different systems: System 1 and System 2.  System 1 is what is most often in effect and handles easy questions that require little thought (i.e. what color is the sky, what is 2+2) while System 2 is the rational one and is involved in the more complicated questions (such as what is 23 X 17). It is worth noting at this point that it is not quite as cut and dry as this example makes it look but Kahneman prefers to use this analogy as it make it very easy for everyone to understand. The problem is that System 2 is inherently lazy and often accepts the answer that System 1 puts forth. Further, if System 1 is not able to come to an answer immediately, it often switches the question being asked around.

For example, assume that Julie was an undergraduate at a top Ivy League school during the feminist movement of the past. She was very active on campus and participated in many student organizations and rallies. Now that she has graduated, please rank the occupation that Julie may be in according to what is most likely:

1. Artist
2. Bankteller
3. Pro-Bono Lawyer
4. Fantasy Fiction Writer
5. Bankteller involved in the feminist movement
6. Historical Writer

Go back and look at your list. Did you happen to place choice number 5 as more likely than choice number 2? Statistically, that is impossible as a bankteller involved in the feminist movement is still a bankteller thus number 2 must always be more likely than number 5. However, your System 1 didn’t answer that statistical part of the question, instead it answered “which answer fits the narrative best?”

There are a lot of other interesting learning tidbits in Thinking Fast and Slow, including humans tendency to avoid losses, the “what you see is all there is” situation, and that frowning makes you think more critically! If you want to learn more, go pick up a copy! 

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