Tag: Behavioral Psychology

Daniel Kahneman — What I Know

Nobel prize-winning psychologist Daniel Kahneman talks with the Guardian about his pessimistic mother, the delusion of investment bankers and the need for irony.

Human beings cannot comprehend very large or very small numbers. It would be useful for us to acknowledge that fact.

My main work has concerned judgment and decision-making. But I never felt I was studying the stupidity of mankind in the third person. I always felt I was studying my own mistakes.

Happiness is complicated. There are two components. One is strongly genetic; the second is a question of how you feel at any moment. I am pretty content, but I had a very pessimistic mother, and I’ve always been known as a pessimist.

It was always assumed I would be a professor. I grew up thinking it.

There is a powerful idea that we should want to be richer. I went to a financial advisor in the States and said: “I don’t really want to get richer, but I would like to continue to live like I do.” She said: “I can’t work with you.”

Collaboration is not only more creative, it is more fun. Amos Tversky, my research partner, and I were better together than on our own. We sort of knew that. Mostly it was extremely pleasant not trying to work everything out yourself.

A sense of irony is essential. When we wrote our first paper, “The Law of Small Numbers”, we were laughing all the time we wrote it. A colleague we showed it to said: “This is going to change things.” I didn’t take him seriously.

Many people now say they knew a financial crisis was coming, but they didn’t really. After a crisis we tell ourselves we understand why it happened and maintain the illusion that the world is understandable. In fact, we should accept the world is incomprehensible much of the time.

Motives are rarely straightforward. When the war started my father was chief of research for a company that was part of L’Oréal in Paris. The owner of L’Oréal was also a main funder of the fascist party in France, and antisemitic. But he protected my [Jewish] father during the war when he was taken by the Nazis.

People who wouldn’t even come to your funeral seem to take simple pleasure in the fact that you have won the Nobel prize [for economic sciences], and it makes them feel good about themselves to feel that way. For a while you are spreading joy.

Investment bankers believe in what they do. They don’t want to hear that their decisions are no better than chance. The rest of us pay for their delusions.

Despite 45 years of work in the field, I am still inclined to make over-confident predictions.

Economists have a mystique among social scientists because they know mathematics. They are quite good at explaining what has happened after it has happened, but rarely before. I don’t think of myself as an economist at all.

I enjoy being active but I look forward to the day when I can retire to the internet.

Still curious? Read Thinking, Fast and Slow.

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Why Do People Choose Political Loyalties Over Facts?

One of the theories is cognitive dissonance—we find it difficult to hold contradictory ideas in our head at the same time. Cognitive dissonance predicts that given the choice between our emotional ties and facts, we’ll pick emotional every time. Facts lose.

When Democrats hear the argument that the president can do something about high gas prices, that produces dissonance because it clashes with the loyalties these voters feel toward Obama. The same thing happens when Republicans hear that Obama cannot be held responsible for high gas prices — the information challenges their dislike of the president.

Nyhan and Reifler hypothesized that partisans reject such information not because they’re against the facts, but because it’s painful. That notion suggested a possible solution: If partisans were made to feel better about themselves — if they received a little image and ego boost — could this help them more easily absorb the “blow” of information that threatens their pre-existing views?

Nyhan said that ongoing — and as yet, unpublished — research was showing the technique could be effective. The researchers had voters think of times in their lives when they had done something very positive and found that, fortified by this positive memory, voters were more willing to take in information that challenged their pre-existing views.

“One person talked about taking care of his elderly grandmother — something you wouldn’t expect to have any influence on people’s factual beliefs about politics,” Nyhan said. “But that brings to mind these positive feelings about themselves, which we think will protect them or inoculate them from the threat that unwelcome ideas or unwelcome information might pose to their self-concept.”

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Making Good Citizenship Fun — Richard Thaler

Interesting article by Richard Thaler on encouraging good citizenship by making the desired behavior more fun:

Lotteries are just one way to provide positive reinforcement. Their power comes from the fact that the chance of winning the prize is overvalued. Of course you can simply pay people for doing the right thing, but if the payment is small, it could well backfire. …

An alternative to lotteries is a frequent-flyer-type reward program, where the points can be redeemed for something fun. A free goodie can be a better inducement than cash since it offers that rarest of commodities, a guilt-free pleasure. This sort of reward system has been successfully used in England to encourage recycling. In the Royal Borough of Windsor and Maidenhead outside of London, citizens could sign up for a rewards program in which they earned points depending on the weight of the material they recycled. The points were good for discounts at merchants in the area. Recycling increased by 35 percent.

Daniel Kahneman: How We Think

In the highly anticipated Thinking, Fast and Slow, Daniel Kahneman takes us on a groundbreaking tour of the mind and explains the two systems that drive the way we think. System 1 is fast, intuitive, and emotional; System 2 is slower, more deliberative, and more logical. Kahneman exposes the extraordinary capabilities—and also the faults and biases—of fast thinking, and reveals the pervasive influence of intuitive impressions on our thoughts and behavior. The impact of loss aversion and overconfidence on corporate strategies, the difficulties of predicting what will make us happy in the future, the challenges of properly framing risks at work and at home, the profound effect of cognitive biases on everything from playing the stock market to planning the next vacation—each of these can be understood only by knowing how the two systems work together to shape our judgments and decisions.