I recently finished Daniel Kahneman’s book, Thinking Fast and Slow. It is a formidable accomplishment, dense with an accessible account of his approaches to and work discussing the psychological underpinnings of decision making over the years. It is an absolute must-read for anyone with an interest in the psychological aspects of decision making, the implications and limitations of the rational agent model, foundation of what we now know as behavioral economics.
The work reads as an anthology of developments in psychology and behavioral economics which leads the reader through the major contributions in both areas of study. It begins with an account of the “two systems” model of thinking (this model inspires the book’s title): a System 1, which engages in intuitive, immediate thinking, and a System 2, which engages in pointed, critical, thoughtful thinking. As the problem of the baseball and bat illustrates, when faced with a task, individuals are often willing to accept the lazy response of System 1 to an effortful (but quite often more accurate) response of System 2.
The distinction between these two systems lies behind the divergence of many of us from what one would call “optimal” or “rational decision making”. Instead of thinking purposefully and analytically, we rely on quick judgments or psychological “rules of thumb” (known as heuristics). And to out detriment, the resulting biases can very often lead us astray. They come in many flavors (including issues of framing and availability bias), and they influence our decision making often much more than a strict interpretation of “rationality” may lead you to believe.
This is the basis for behavioral economics, and Kahneman has always been a central figure in the journey of this field of study. Thinking Fast and Thinking Slow proves to serve as both a beginner’s primer and an expert’s bible – and regardless of your level of knowledge going in, it is an accessible, stimulating, worldview-changing exploration into the theory of decision making.