DANIEL KAHNEMAN (Syllabus: GS Paper 3 – Economy)

News-CRUX-10     3rd April 2024        

Context: Recently, one of the pioneers of psychology and economics research, Daniel Kahneman, passed away.

Daniel Kahneman

  • Early Life: Kahneman, an Israeli-American psychologist, won the Nobel prize in economics in 2002 for integrating psychological insights into economic science, particularly regarding human judgment and decision-making under uncertainty.
  • Seminal Works: Kahneman authored several influential books and papers, notably "Thinking, Fast and Slow," which elucidated human thought processes, errors, biases, and decision-making fallacies.
  • Focus on Variability: His book "Noise" explored unwanted variability in judgments, contrasting bias and emphasizing the importance of consistency in decision-making.
  • Challenging Rationality Assumptions: Kahneman's experiments challenged the assumption of rationality among economic agents, laying the foundation for behavioral economics as a field.
  • Unintentional Influence: Kahneman and Tversky's seminal work unintentionally laid the foundation for contemporary behavioral economics, despite their initial intentions unrelated to economics.
  • Loss Aversion Principle: One of their fundamental postulates centered on loss aversion, proposing that individuals tend to be more sensitive to losses than gains of an equivalent magnitude, with losses holding a greater psychological weight.
  • Hedonic Psychology: Kahneman's theory within hedonic psychology emphasized the significance of experiences over mere outcomes in understanding happiness and overall well-being.
  • Honours: Awarded the Nobel Prize in 2002 for his psychological insights in economics.
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