Maps Of Bounded Rationality: A Perspective On Intuitive Judgment And Choice

Prize Lecture, December 8, 2002

by

DANIEL KAHNEMAN

Princeton University, Department of Psychology, Princeton, NJ 08544, USA.

The work cited by the Nobel committee was done jointly with the late Amos Tversky (1937–1996) during a long and unusually close collaboration.

Together, we explored the psychology of intuitive beliefs and choices and examined their bounded rationality. This essay presents a current perspective on the three major topics of our joint work: heuristics of judgment, risky choice, and framing effects. In all three domains we studied intuitions – thoughts and preferences that come to mind quickly and without much reflection.

I review the older research and some recent developments in light of two ideas that have become central to social-cognitive psychology in the intervening decades: the notion that thoughts differ in a dimension of accessibility – some come to mind much more easily than others – and the distinction between intuitive and deliberate thought processes.

Section 1 distinguishes two generic modes of cognitive function: an intuitive mode in which judgments and decisions are made automatically and rapidly, and a controlled mode, which is deliberate and slower. Section 2 describes the factors that determine the relative accessibility of different judgments and responses. Section 3 explains framing effects in terms of differential salience and accessibility. Section 4 relates prospect theory to the general proposition that changes and differences are more accessible than absolute values. Section 5 reviews an attribute substitution model of heuristic judgment. Section 6 describes a particular family of heuristics, called prototype heuristics. Section 7 concludes with a review of the argument.

1. Daniel Kahneman: Intuition And Accessibility

From its earliest days, the research that Tversky and I conducted was guided by the idea that intuitive judgments occupy a position – perhaps corresponding to evolutionary history – between the automatic operations of perception and the deliberate operations of reasoning. Our first joint article examined systematic errors in the casual statistical judgments of statistically sophisticated researchers (Tversky & Kahneman, 1971). Remarkably, the intuitive judgments of these experts did not conform to statistical principles with which they were thoroughly familiar. In particular, their intuitive statistical inferences and their estimates of statistical power showed a striking lack of sensitivity to the effects of sample size. We were impressed by the persistence of discrepancies between statistical intuition and statistical knowledge, which we observed both in ourselves and in our colleagues. We were also impressed by the fact that significant research decisions, such as the choice of sample size for an experiment, are routinely guided by the flawed intuitions of people who know better. In the terminology that became accepted much later, we held a two-system view, which distinguished intuition from reasoning. Our research focused on errors of intuition, which we studied both for their intrinsic interest and for their value as diagnostic indicators of cognitive mechanisms.

Daniel Kahneman: The two-system view

The distinction between intuition and reasoning has been a topic of considerable interest in the intervening decades (among many others, see Epstein, 1994; Hammond, 1996; Jacoby, 1981, 1996; and numerous models collected by Chaiken & Trope, 1999; for comprehensive reviews of intuition, see Hogarth, 2002; Myers, 2002). In particular, the differences between the two modes of thought have been invoked in attempts to organize seemingly contradictory results in studies of judgment under uncertainty (Kahneman & Frederick, 2002; Sloman, 1996, 2002; Stanovich, 1999; Stanovich & West, 2002). There is considerable agreement on the characteristics that distinguish the two types of cognitive processes, which Stanovich and West (2000) labeled System 1 and System 2.

The scheme shown in Figure 1 summarizes these characteristics: The operations of System 1 are fast, automatic, effortless, associative, and difficult to control or modify. The operations of System 2 are slower, serial, effortful, and deliberately controlled; they are also relatively flexible and potentially rule-governed. As indicated in Figure 1, the operating characteristics of System 1 are similar to the features of perceptual processes. On the other hand, as Figure 1 also shows, the operations of System 1, like those of System 2, are not restricted to the processing of current stimulation. Intuitive judgments deal with concepts as well as with percepts, and can be evoked by language.

Daniel Kahneman Bounded Rationality

See full “Classic: Daniel Kahneman on Maps Of Bounded Rationality” in PDF Format here via nobelprize.org