Daniel Kahneman: The Human Side of Decision Making

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The Human Side of Decision Making; Thinking Things Through with Daniel Kahneman, PhD

Daniel Kahneman is widely considered the most infl uential psychologist in the world today. He is best known in the financial realm for pioneering work that helped to lay the foundation for behavioral economics, which studies the psychology of judgment and economic decision making and its impact on the financial markets. Together with his long-time collaborator Amos Tversky, Dr. Kahneman explored the ways in which human judgment systematically departs from the basic principles of decision theory when evaluating economic risk, consequently creating the concept of prospect theory. Their findings challenged fundamental economic assumptions and expanded the boundaries of
research by introducing psychologically realistic models into economic theory. So ground-breaking are their discoveries that New York Times columnist David Brooks has called Drs. Kahneman and Tversky “the Lewis and Clark of the mind.” In 2002, Dr. Kahneman’s work was recognized with the Nobel Memorial Prize in Economic Sciences for his integration of insights from psychological research into economic science.

Born in Tel Aviv in 1934, Daniel Kahneman spent his childhood—including the period of the Nazi occupation (1940–1944)—in France before moving to British Palestine (now Israel) in 1948. In 1954, he earned a bachelor of science degree with a major in psychology and a minor in mathematics from Th e Hebrew University of Jerusalem, then joined the Israel Defense Forces, where he served in the psychology branch. His responsibilities included evaluating candidates for officer training school and developing a method for interviewing combat unit recruits, which much later provided some of the basic ideas of his work with Amos Tversky on judgment. According to Daniel Kahneman, “Th is was the beginning of a lifelong interest in the statistics of prediction and description.” In 1958, he began PhD studies at the University of California, Berkeley. After completing a doctorate in psychology in 1961, Dr. Kahneman returned to Th e Hebrew University of Jerusalem as a lecturer in psychology; he was promoted to senior lecturer in 1966 and later to professor.

In 1969, Dr. Kahneman began his long collaboration with Dr. Tversky, a fellow psychology professor at Th e Hebrew University. Th eir fi rst jointly authored paper, “Belief in the Law of Small Numbers,” was published in 1971. Over the next thirteen years, Daniel Kahneman and Dr. Tversky worked together to produce a series of seminal articles in the field of judgment and decision making. Among the most important of these were “Judgment under Uncertainty: Heuristics and Biases,” published in 1974 in Science, which introduced the idea of judgment heuristics, including anchoring; and “Prospect Th eory: An Analysis of Decision under Risk,” published in 1979 in Econometrica. In 1977, Dr. Kahneman and Dr. Tversky met Richard Thaler, who later became the leading figure in behavioral economics. Dr. Kahneman has called his friendship with Dr. Thaler “the second most important professional friendship” of his life. Dr. Kahneman and Dr. Tversky subsequently became involved in the development of this new approach to economic theory, eventually collaborating on several papers with Dr. Thaler.

In 1978, Dr. Kahneman moved to Vancouver to take a position as professor of psychology at the University of British Columbia. He continued to collaborate with Dr. Tversky, who had accepted a position at Stanford University the same year, and the two completed their study of framing over the next several years. Dr. Kahneman also collaborated with Dr. Thaler on a variety of topics that integrated psychology and economics, including the endowment eff ect and public views about fairness in economic transactions. From 1986 to 1993, Dr. Kahneman returned to the University of California, Berkeley, as professor of psychology. During the 1990s, Dr. Kahneman’s research focus shifted to hedonic psychology—the study of what makes experiences and life pleasant or unpleasant, satisfying or unsatisfying—as well as to studies of well-being that built on his previous research about experienced utility. Recently he has been working to develop and promote adversarial collaboration within the social sciences. During the course of his academic career, Daniel Kahneman also has been associated with the University of Michigan, Harvard University, the Russell Sage Foundation, the Canadian Institute for Advanced Research, and the Applied Psychological Research Unit in Cambridge, England.

Since 1993, Daniel Kahneman has been associated with Princeton University, where he is the Eugene Higgins Professor of Psychology, Emeritus, and Professor of Psychology and Public Affairs, Emeritus; he is also a Senior Scholar at Princeton’s Woodrow Wilson School of Public and International Affairs and a Fellow at the Center for Rationality at Th e Hebrew University of Jerusalem. Since 2004, he has served as a Gallup senior scientist, advising and consulting with Gallup researchers on behavioral economics and his recent research on psychological well-being. Daniel Kahneman is a founding partner of The Greatest Good, a business and philanthropy consulting company formed with the goal of applying cutting-edge data analysis and economic methods to the most salient problems in business. He is a consultant to Guggenheim Partners, an investment advisory firm.

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