DANIEL KAHNEMAN (Syllabus: GS Paper 3 – Economy)

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.