On “Thinking, Fast and Slow”

 

I have just finished reading Daniel Kahneman’s book “Thinking, Fast and Slow”. It has many implications for how to make a revolution. The book is based on research Kahneman has done with Amos Tversky and others and on the work of other psychologists and a few economists. He mentions an area of study called behavioral economics but the book is based on psychological experiments.

The most well-known impact of the research described in this book is, or should be, on the simplistic economic theories that are now widely accepted. The book shows their assumptions, their axioms, are wrong, not at all based on how humans actually behave, contradicting how humans actually behave. Not only are much of the mathematics behind these theories wrong (see Steve Keen’s writings), but the assumptions about human behavior these theories start with are proved wrong by the psychological experiments described in this book. Economics, as we have known it is, or should be, dead, dead, dead. To make a revolution we must first stop using false theories. We must spread the word and discredit economists and any others who continue to rely on false theories.

Beyond this there are many implications for how the revolution should be carried out. People think differently depending on how questions are asked or how problems are stated. These effects are called framing. Here is a simple example. If you are about to have a dangerous heart operation and you ask what are your odds, it matters a lot to both you and to doctors (and almost everyone else) how the answer is made. One way to say it is: You have a 5% chance of dying. Another way to say it is: You have a 95% chance of making it. Framing matters. Heart surgeons who tell their patients “You have a 95% chance of surviving” instead of “You have a 5% chance of dying” will have more customers.

People generally are “loss averse” — they are much more unhappy about the idea of losing something they already have than they would be happy about gaining the same thing or something of equal value. We would like to convince the 1% that they would be better off if they were somewhat less rich in a more just and stable and productive system. We will have to overcome their loss aversion. We will have to convince them that the value for them of living in a system which distributes the productions of society more fairly in a stable and more productive system is way, way more than the value for them of the income or wealth they will lose. The same goes for those who will have different roles or jobs in a changed economic/political system.

Kahneman describes two systems for thinking which he calls system 1 and system 2. System 1 is the fast system, system 2 is the slow one. System 1 is roughly our intuitions. It works automatically and instantaneously. It works with our associative memory. If someone asks you if you like chocolate you immediately know the answer through system 1. If someone asks you what is 17 X 24, you must use system 2 because system 1 has no answer. System 2 is generally lazy. So, at times when system 1 does have an answer, system 2 will accept it even if it is wrong. Most often system 1 is right since its associations and rules of thumb work well enough for us in most of our daily activities. But system 1 doesn’t evaluate itself and it can only work with the information it has, with the information it can get by association immediately. So it is limited to working with this information. Kahneman characterizes this by the phrase “What You See Is All There Is” —WYSIATI. What system 1 “sees” in any situation is all that System 1 has to work with. System 1 is automatic and instantaneous so it doesn’t have time to ruminate, make comparisons, calculate. Besides these are what system 2 does. The interactions between system 1 and system 2 are where many mistakes in thinking occur. And we recently had a president (Bush II) who was proud to say he relied on his intuition, his gut, in making decisions. Kahneman’s book “Thinking, Fast and Slow” is relevant to the present sorry state of our world. If you want to begin to understand us and our cultures, our economic and political systems, and how we might change them for the better, read this book.

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