Remembering Daniel Kahneman Legacy of behavioural economics brilliance

Prof D Mukherjee
Daniel Kahneman, a renowned scholar of behavioural economics and a pioneer in the field of psychology, passed away on March 27, 2024, at the age of 90. Born in Tel Aviv, on March 5, 1934, Kahneman’s early life was marked by the turmoil of World War II, during which his family survived Nazi occupation and the loss of his father to diabetes. Kahneman’s contributions to academia and the study of human behaviour are of the Himalayan magnificence and magnitude. Alongside Amos Tversky and others, he laid the cognitive foundation for understanding common human errors arising from heuristics and biases, leading to the development of prospect theory. His work has had a profound impact on fields such as cognitive biases, behavioural economics, prospect theory, loss aversion, and hedonic psychology. In 2011, Foreign Policy magazine named Kahneman one of the top global thinkers. His book ‘Thinking, Fast and Slow’ published in the same year, became a bestseller and a seminal work in the field. The Economist, London, United Kingdom, recognized him as the seventh most influential economist in the world in 2015.
Throughout his career, Kahneman held prestigious positions, including professor emeritus of psychology and public affairs at Princeton University’s Princeton School of Public and International Affairs. He was also a founding partner of TGG Group, a consulting company. Kahneman’s academic journey included studies at Hebrew University and the University of California, Berkeley, where he earned his BA, MA, and PhD. In 1958, Kahneman started to pursue a PhD in Psychology at the University of California, Berkeley. His dissertation, completed in 1961 under the guidance of Susan Ervin, focused on the relationships between adjectives in the semantic differential. This research allowed him to indulge in two of his favourite activities: analysing complex correlational structures and programming in FORTRAN. Daniel Kahneman began his academic journey as a psychology instructor at the Hebrew University of Jerusalem, later becoming a senior instructor. His early research focused on visual perception and concentration. He spent time as a visiting scholar at the University of Michigan and the Applied Psychology Research Unit in Cambridge, followed by a fellowship at the Centre for Cognitive Studies and a lecturer position in cognitive studies at Harvard University. His work on concentration led to the publication of ‘Attention and Effort,’ which proposed a theory of effort based on pupil size changes during mental tasks. He also co-authored ‘Norm Theory’ with Dale Miller, exploring principles of counterfactual thinking.
In 1969, Kahneman began a ground-breaking collaboration with Amos Tversky, introducing concepts like anchoring and prospect theory. This collaboration continued until Tversky’s death, significantly influencing the field of behavioural economics. Kahneman was awarded the Nobel Memorial Prize in Economics in 2002 for integrating psychological research into economic science. After leaving Hebrew University in 1978, he joined the University of British Columbia. One of Kahneman’s significant contributions is the book ‘Noise: A Flaw in Human Judgment,’ co-authored with others, which has influenced scholars in behavioural economics. Their work also inspired Richard Thaler, whose publication ‘Toward a Positive Theory of Consumer Choice’ became foundational in the field. Despite their geographical separation, Kahneman and Tversky continued to publish together, shaping the field of decision-making and utility theory.
Kahneman’s research from 1979 to 1986 focused on decision-making and utility theory, distinguishing between experienced utility and decision utility. He explored concepts like remembered and predicted utility, highlighting the peak-end rule’s impact on memory. His work extended to happiness studies, distinguishing between the experiencing self and the remembering self.
In the early 2000s, Kahneman led a team to create a measure of experienced happiness, resulting in the ‘Day-Reconstruction Method.’ However, the idea that experienced happiness is the better concept for well-being did not hold. Kahneman also developed the concept of the focusing illusion, explaining how people often overestimate the importance of specific factors in predicting their future happiness. Among his numerous accolades, Kahneman received the Nobel Memorial Prize in Economic Sciences in 2002 sharing with Vernon L. Smith, recognizing his ground-breaking contributions to understanding human decision-making processes. He was also honoured with the APA Distinguished Scientific Contribution Award, the University of Louisville Grawemeyer Award, the APA Lifetime Achievement Award, and the Presidential Medal of Freedom. Kahneman’s impact extended beyond his research and writings. He mentored and influenced a generation of scholars, including Anat Ninio, Avishai Henik, Baruch Fischhoff, Ziv Carmon, Nathan Novemsky, and Maria Stone. His legacy in academia and the study of human behaviour is profound, with former colleague Eldar Shafir noting that ‘many areas in the social sciences simply have not been the same since he arrived on the scene.’
Kahneman’s Journey from Jerusalem to Berkeley enriched the academic and researchers with new insights of the contributions of psychology in decision making. In 1954, Kahneman earned his Bachelor of Science degree from the Hebrew University of Jerusalem, majoring in psychology and minoring in mathematics. Yeshayahu Leibowitz, an Israeli scholar whom Kahneman considers influential in his intellectual growth, taught him chemistry at Beit-Hakerem High School and later served as his physiology professor at university. While Kahneman’s math skills were average, he excelled in psychology. His interest in psychology was sparked during his teenage years when he became more fascinated by the reasons behind people’s belief in God than by the existence of God itself, and more intrigued by anger than by ethics. After completing his undergraduate studies, Kahneman began his military service in 1954 as a second lieutenant, serving in the infantry for a year. He then transferred to the psychology department of the Israeli Defence Forces, where he created a structured interview for combat recruits that remained in use for many years. Kahneman considers his military service a crucial period in his life. Similarly, Kahneman’s research on loss aversion highlights the asymmetry between the pain of losing and the pleasure of gaining, suggesting that individuals are more motivated to avoid losses than to seek gains. This insight can inform policy design, encouraging policymakers to frame policies in a way that emphasizes potential losses from inaction, thus motivating action. In the business world, understanding these biases can help companies design more effective marketing strategies, pricing models, and employee incentive programs Furthermore, Kahneman’s work on the impact of framing effects underscores the importance of how information is presented. Businesses can leverage this insight to frame their messages in a way that resonates with their target audience, leading to more persuasive communication and decision-making.
Kahneman’s influence extended far beyond the academic realm. His work has had a profound impact on various fields, including economics, psychology, and public policy. His research on cognitive biases and decision-making processes has been instrumental in shaping how we understand human behaviour and has paved the way for more effective policies and interventions.
As we mourn the loss of Daniel Kahneman, we also celebrate his remarkable life and contributions. His legacy will continue to inspire future generations of scholars and researchers to explore the complexities of the human mind and behaviour. Kahneman’s work has not only enriched our understanding of the world but has also left an enduring mark on how we approach challenges and make decisions in our lives. Kahneman in true academic spirit was a challenge to the classical economists who doctrinaire that Economics is more of rational in decision making than anything. Overall, Kahneman’s work has had a profound impact on various fields, including psychology, economics, and decision-making, shaping our understanding of human behaviour and cognition. Daniel Kahneman will be remembered as a brilliant scholar whose work reshaped understanding of decision-making and human behaviour, leaving an indelible mark on academia and the field of behavioural economics.
(The author is Bangalore Based Educationist and a Management Scientist)

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