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Thinking, fast and slow by Daniel Kahneman


Joel Fernando

By

September 13th, 2020


There’s a lot to be learned about economics beyond lecture halls, journals and the news. Books can provide a holistic, sometimes radically different, perspective on the role of economics. What can we learn from these books? With our new weekly book review, ESSA intends to find out. This time, read on for our review of: Thinking, Fast and Slow.


⭐⭐⭐⭐⭐

“Nothing in life is as important as you think it is, while you are thinking about it”

Thinking, Fast and Slow’ written by Daniel Kahneman—winner of the 2002 Nobel Prize in Economic Sciences—is a book that explores human irrationality. I’ll start off by saying that this book took me a long time to finish and was at times quite laborious however, by the end, I was glad that I persisted due to the implications of what was inside. Kahneman, a psychologist, explains in great detail his life’s work on judgment, decision-making and behavioural economics more broadly.

A brief summary of this book is as follows: there are two systems in our mind, System 1 and System 2. System 1 acts immediately and automatically in response to stimuli (e.g. Answer 2 + 2 = or detecting hostility in a voice) however, System 1 is prone to jump to conclusions, rely on bad evidence and can be manipulated, leading to irrational decisions. By contrast, System 2 “allocates attention to the effortful mental activities that demand it, including complex computations” (e.g. Answer 17 x 24 =). Kahneman’s main argument is that we identify with System 2 as we believe that our reasoning and conscious self “has beliefs, makes choices and decides what to think about and what to do” although, it is our involuntarily System 1 that guides a lot of our decision-making despite its flaws.

For some people, given that System 1 is involuntarily and there is not much we can do to change the way it operates, they may stop reading the book after learning about these ‘simple’ conclusions. For others who continue to read on, they will discover that these seemingly ‘simple’ concepts have far-reaching implications. Specifically, Kahneman discusses various topics such as heuristics and biases, overconfidence in our decisions, choices and the experiencing self vs the remembering self. I could go on and try to explain these ideas though this would rob you of Kahneman’s fantastic descriptions.

Despite being content heavy and at times difficult to understand, the book does a great job of explaining the concepts to the reader. Kahneman uses a number of fun examples in all chapters to show the reader how their System 1 can lead them astray and then reveals why this is the case. Moreover, my favourite component of the book is at the end of each chapter there are a few lines that describe the contents of the chapter that are simple and digestible—you probably need to read the book to understand what I’m talking about.

At this point, you may be wondering whether reading this book will be worth your time. If you are unsure, I would like to mention that my biggest takeaway from reading ‘Thinking, Fast and Slow’ was that our thoughts are subject to a number of different influences, and maybe our decisions are not as “free” as we like to think. This is probably best exemplified when Kahneman explores the idea of priming—where subtle cues in the environment can predictably change one’s behaviour.  In brief, from reading the book you will gain an understanding of how our brains (particularly System 1) can be tricked and potentially minimise these ‘blind spots’ by engaging your notoriously lazy System 2.

Overall, ‘Thinking, Fast and Slow’ is a great book for anyone interested in behavioural economics as it is written by one of the pioneers of the field. As I said in the beginning, the book and some ideas presented are difficult to read and comprehend but will reward those who manage to stick with it – 5/5 stars 

The views expressed within this article are those of the author and do not represent the views of the ESSA Committee or the Society's sponsors. Use of any content from this article should clearly attribute the work to the author and not to ESSA or its sponsors.

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