Thinking, Fast and Slow (Hardcover)

Author Daniel Kahneman · Publisher Gimm-Young Publishers · Published 2018-03-30 · ISBN 9788934981213

About the Book

"This book is a classic on par with Adam Smith's The Wealth of Nations and Freud's The Interpretation of Dreams!" — Nassim Nicholas Taleb

Behavioral economics is a new concept in economics, but at its root lies psychology. In behavioral economics, which defines humans as the agents of economic and social activities, the most important aspects are humans as individuals, their behavior, and the 'thoughts' that control and guide that behavior. Kahneman collaborated with Amos Tversky from 1969 onwards, conducting continuous research. Each of their papers and studies sent a shockwave and fresh impact through academia. These two scholars, who significantly influenced the social sciences with their paper arguing that 'human thought is vulnerable to systematic errors,' finally published their foundational theory of choice for behavioral economics in 1979 with their paper "Prospect Theory: An Analysis of Decision Under Risk." This theory on 'judgment and decision-making' gave birth to behavioral economics, and Kahneman was awarded the Nobel Memorial Prize in Economic Sciences in 2002. Although numerous behavioral economics books subsequently flooded bookstores like a trend, the creator's own book was conspicuously absent. After a long wait, the doyen of behavioral economics finally unveiled his work, and upon the publication of his first popular science book, it garnered attention and praise from all media outlets in political, economic, social, and scientific circles. That book is Thinking, Fast and Slow (published by Gimm-Young Publishers). In this book, Kahneman explains human thoughts, which are the source of all human behavior, life, and existence, by dividing them into two main categories: 'fast thinking,' which refers to intuition, and 'slow thinking,' which refers to reason.
Examples of 'fast thinking' include the animalistic reflex to dodge an oncoming car, the correct answer to 2+2, and the completely automatic mental activity of recalling the capital of France, which involve concepts and memories. In contrast, 'slow thinking' is the thoughtful and deliberate process of finding solutions to problems that do not immediately come to mind, such as an expert's solution or the answer to 354×687. The difference between fast and slow thinking has been a popular research topic for numerous psychologists over the past 25 years. Daniel Kahneman vividly explains the fascinating mental life of humans through the metaphor of two entities that trigger fast and slow thinking: 'System 1' and 'System 2.' The intuitive System 1 exerts a greater influence than experience provides and subtly controls many of our choices and judgments. The book largely covers how System 1 operates and the interactions between System 1 and System 2, like a psychodrama featuring two characters.

Daniel Kahneman, the founder of behavioral economics who overturned the 300-year framework of traditional economics, presents his first popular science book!

This seemingly challenging book is composed of five parts. Part 1 presents the fundamental principles of how the two systems influence judgment and choice. It explains the differences between the automatic activities of System 1 and the controlled activities of System 2, and shows why 'associative memory,' the core of System 1, continuously provides a consistent explanation for what happens to us.
Part 2 introduces the latest research findings on judgmental heuristics. It explores the question, "Why is statistical thinking so difficult?" We are good at association, thinking metaphorically, and understanding causality, but statistical thinking requires considering many things at once and is far removed from System 1 thinking.
Part 3 focuses on the difficulty of statistical thinking. It addresses the perplexing limitations of the mind. We over-rely on our beliefs and fail to acknowledge how ignorant we are or how uncertain the world we live in is. We overestimate our ability to understand the world and underestimate the role of chance in events.
Part 4 examines the claims made in economics regarding the nature of decisions and the assertion that economic agents are rational. It introduces the core concepts of prospect theory, the choice model published by Amos and Kahneman in 1979, from a current perspective based on the two-system model. It then addresses various human choices that deviate from rationality rules. Here, it explains the unfortunate tendency to consider problems in isolation and the framing effect, where decisions change due to trivial characteristics present in choice problems. These phenomena, which can be fully explained by the characteristics of System 1, directly challenge the rationality championed by traditional economics.
Part 5 introduces the difference between two selves: the 'experiencing self' and the 'remembering self.' For example, when we go on a trip to satisfy the 'experiencing self,' we might end up doing nothing fun but only taking pictures, thus satisfying only the 'remembering self.' When we choose what to recall later, we are naturally guided by the remembering self. At this point, we might expose our experiencing self to unnecessary suffering. These two selves also apply to measuring our 'happiness.' The different ways these two selves within one body pursue happiness raise profound questions not only for individuals but also for societies that aim for public happiness as a policy goal.

A modern classic that opened new horizons in human studies, the bible of behavioral economics and cognitive psychology!

Since the 21st century, various academic fields have seen a strong emphasis on discussions and claims about human limitations and imperfections. Books are being introduced that sharply point out human characteristics of overestimating their abilities and underestimating their environment and luck, and that present ways of thinking and behaving to compensate for these weaknesses. All these claims and works are based on Kahneman's extensive research findings explained in this book.
"If Adam Smith is the father of classical economics, Daniel Kahneman is the godfather of modern economics!" This masterpiece by a unique intellectual, a living master, has received widespread media acclaim. But don't be too intimidated to approach it. While it may not be easy, it's not so difficult or complex as to be inaccessible.
Readers of this book will encounter numerous quizzes, from simple multiplication problems, picture problems, and geometric problems, to complex problems related to difficult murder cases and hit-and-run incidents involving taxis in big cities. If possible, take your time to solve and think through each one. These fun and intriguing quizzes are all starting points for research that forms the foundation of great social science theories. Let go of the pressure of challenging the findings of an eminent scholar and read it carefully. The initially unfamiliar terms and concepts of 'System 1' and 'System 2' will become familiar, and you will realize which of the two selves, that seemed to operate independently within you, you have favored. This will inspire a desire for improvement and encourage you to strive for a more desirable self-formation. Ultimately, Thinking, Fast and Slow is about thoughts that enhance human happiness and enrich our lives.

Table of Contents

Foreword
Preface

Part 1: Two Systems
1. The Characters
2. Attention and Effort
3. The Lazy Controller
4. The Associative Machine
5. Cognitive Ease
6. Norms, Surprises, and Causes
7. A Machine for Jumping to Conclusions
8. How Judgments Happen
9. Answering an Easier Question

Part 2: Heuristics and Biases
10. The Law of Small Numbers
11. Anchors
12. The Science of Availability
13. Availability, Emotion, and Risk
14. Tom W.'s Specialty
15. Linda: Less Is More
16. Causes Trump Statistics
17. Regression to the Mean
18. Taming Intuitive Predictions

Part 3: Overconfidence
19. The Illusion of Understanding
20. The Illusion of Validity
21. Intuitions vs. Formulas
22. Expert Intuition: When Can We Trust It?
23. The Outside View
24. The Engine of Capitalism

Part 4: Choices
25. Bernoulli's Errors
26. Prospect Theory
27. The Endowment Effect
28. Bad Events
29. The Fourfold Pattern
30. Rare Events
31. Risk Policies
32. Mental Accounts
33. Reversals
34. Frames and Reality

Part 5: Two Selves
35. Two Selves
36. Life as a Story
37. Experienced Well-Being
38. Thinking About Life

Conclusion
Appendix A: Judgment Under Uncertainty: Heuristics and Biases
Appendix B: Choices, Values, and Frames
Notes
Acknowledgments
Index