Wednesday, September 5, 2012

Daniel Kahneman Introduction

Daniel Kahneman

A nobel laureate and current professor at Princeton University, Daniel Kahneman is credited with being one of developers of the field of behavioral economics. In a landmark 1979 paper on decision-making, he developed a theory as to why people will often make the less-rational decision in a given situation rather than the optimal choice. Kahneman revolutionized the field of economics by beginning to look at it not as a completely rational system, but one that was susceptible to human error and irrationality.
            Kahneman’s work was groundbreaking in combining aspects of several fields of the social sciences. By taking a multi-faceted approach to economic study he granted much greater insight into human decision-making and motivation. One of his most famous developments was his work on “prospect theory” with Amos Tversky. The theory is essentially a variation of the expected utility theory assuming conditions of risk. Through research they found that people underweight options that are merely probably as compared to options that are certain.
Before I was assigned this alias I wasn’t familiar with Kahneman; however, I have read several books centered on behavioral economics. Freakonomics and Superfreakonomics by Steven Levitt both provide an elementary look into incentives-based decision-making and actions. The aforementioned books allowed me to gain an accessible look into a quite complex branch of economics and covered interesting topics. Kahneman's work will be very relevant to the material we cover in class. Studying how humans interact and weigh choices is a large part of how organizations operate. 

 Works Cited
"Daniel Kahneman: Behavioral Economics Founder." TED: Ideas Worth Spreading. TED, n.d. Web. 5 Sep 2012.
"Prospect Theory." Behavioural Finance. N.p., n.d. Web. 5 Sep 2012. <>.


  1. Thanks for this post. One way that Kahneman is importance to us is that his works shows how the status quo has power and making changes from it that make some people worse off is very hard to do. People will resist such change.

    I don't know that Levitt is a Behavioral Economist. I think of him as the quintessential data guy. He finds truth by staring at the data - like that story of showing the school teachers where cheating on behalf of their students. Richard Thaler, who is a colleague of Levitt's at U of Chicago, is the one people think of as a behavioral economist.

  2. I have to say I am jealous of you, Kahneman is by and large my favorite scientist even though he does not consider himself an economist, his work has started a movement in the field that is growing rapidly. Behavioral Economics is actually my area of focus and while it is difficult to find colleagues at Illinois many students are beginning to catch on to the field. The ideas are interesting and there are many areas to explore by combining other social sciences with economic theory.
    A few comments:I would agree with Prof. Arvan, Freakonomics and Levitt are not considered behavioral economics. Richard Thaler on the other hand is most definitely one of the most famous behavioral economists in the world. If Kahneman is the Father of behavioral economics, then Thaler is the Godfather.
    If you are looking for accessible/popular readings on behavioral economics I would first suggest Kahneman's own book, "Thinking Fast and Slow" which just came out last year. Also, "Nudge" by Thaler is a must read as well. Another behavioral economist to look at would be Dan Ariely, who has published 3 popular books so far.