Friday, November 6, 2020

Review of Thinking, Fast and Slow by Daniel Kahneman

Book can be found in:
Genre = Economics, Behavioral

Elaborate Description

The way our brains perceive reality is often times not actually reality. Various biases affect decision making ability. Some biases help manage our lives, acting like middlemen which make the system more efficient. Other biases create problems which reduce our total happiness, or make us believe that we are less so than actually. Our perception is evolutionary helpful in some situations while malicious is other situation as the need for the biases have changed due to lifestyle changed. The only certainty that comes from this book is that we cannot control how our brain reacts to certain situation, but recognizing the biased reactions helps to ameliorate the decision making process.

The book's main concern is how we think when presented with situations. Two types of though process are characterized as System 1 and System 2 to help associate what type of thinking we do. System 1 is more intuitive while System 2 requires effort is deliberate. The associate thoughts to information are a blunt instrument that System 1 does, while System 2 does the job of pinning down precise logical connections.

The biases usually have to do with uncertainty and anchoring. Statistics is something that the brain does not do well when told of particular narrative examples. The way a question is formatted, even if having the same result by asking it another way, can have a major impact on what decisions get made.

One of the claims made in the book, which is roughly the most salient wrong byproduct of the book, about economists and rational agent model, usually refer to a narrow group of people but over exaggerated in the book. It was well understood by Adam Smith that losses carry more weight than gains as it is part of Moral Sentiments. It may be the fault of Kahneman to pick on the model, but he does provide some history of Prospect Theory that goes all the way back to Bernoulli's work from 1738.

Kahneman did an extremely great job writing about various biases and reinforcing their implications in various situation. The value of this book is on the implications to economics. The same way The Wealth of Nations made us consider different options for greater prosperity by recognizing the importance of exchange, this book help recognize the importance of behavior in making decisions.

Book Details

Edition ISBN:  9780374533557
Pages to read:   444
Publication:     2013
1st Edition:      2010
Format:            Paperback

Ratings out of 5:
Readability    5
Content          5
Overall           5