December 12, 2011

Thinking, fast and slow (and often irrationally)

Thinking, Fast and SlowThinking, Fast and Slow by Daniel Kahneman

My rating: 5 of 5 stars

An excellent summary of what's the latest thinking and findings in the worlds of behavioral economics, behavioral psychology and related areas.

Kahnemann shows that, and more importantly, how and why, we don't always know what will make us happy, how long it will make us happy or how much it will make us happy.

Other than showing how we don't know ourselves very well, he also shows how we don't act rationally around money and financial issues. The primary reason for this is loss aversion, which carries over into non-financial decisions.

The basis for this? We're really "two personalities," he says, based on long work of him and his peer, Amos Tversky.

System 1 acts fast, intuitively and largely unconsciously.

System 2 acts slow, with brain energy consumption, but rationally. However, it can get "lazy" at times, Kahnemann notes, in what should be a word of caution to scientists, skeptics of various stripes and others.

There's nothing new that's earth-shattering here. Rather, this is a "magnum opus" summary of Kahnemann's life work, along with that of Tversky, and connected to Robert Thaler, Dennis Gilbert and others in a younger generation of behavioral psychologists. It's valuable as that summary, though, valuable indeed.

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