Kahneman.pngProf Daniel Kahneman is the blog’s favourite living social scientist. He won the 2002 Nobel Prize for economics for his insight that:

• Economists are wrong to assume human beings are motivated by self-interest and make rational decisions
• In fact, human judgement may take short-cuts that systematically depart from basic principles of probability
• The avoidance of loss and disadvantage is a more important driver than the hope for gain and advantage

CMAI kindly allowed the blog to repeat Kahneman’s most famous experiment on the day of his Nobel award, with an audience of 500 people. His insight was again proved correct.

Unfortunately, most policymakers ignored his work, although it could have helped them to avoid the current financial crisis. The blog only hopes they will now read his new book, ‘Thinking, Fast and Slow’. It raises important questions about how we allow perception to dominate reasoned analysis, and could be a powerful tool for promoting global economic recovery.

The chart above is one of his examples:

• It appears that the top line is shorter
• But if you measure it, they are both the same

Now you know they are the same, does your mind accept this fact?

The answer, certainly in the blog’s case, is ‘no’. It wants to believe the top line is shorter, even though it drew the lines. This is Kahneman’s point.

He argues that the mind has two ways of operating:

• One is fast and intuitive (System 1)
• The other is slow and analytical (System 2)

And as this example shows, they operate independently, so that “you cannot decide to see the lines as equal, even though you know they are. To resist the illusion, you must learn to distrust your impressions of the length of lines when fins are attached to them”.

Politicians can’t summarise Kahneman’s work in 146 characters on Twitter. Nor can it provide a sensationalist headline for the mass-media.

But his work does explain why such ‘sound-bites’ can appear effective. They allow us to use System 1 and rush to instant judgement.

It also explains why current policies, mostly based on System 1 thinking, may appear to be rational, whilst taking us steadily in the wrong direction.