Nobel Prize winner Daniel Kahneman, one of the world’s most influential economists, has died

Acclaimed Israeli-American psychologist, professor, economist and winner of the 2002 Nobel Prize in Economics, Daniel Kahneman, has died at the age of 90. Emeritus professor of psychology and public affairs at Princeton University in New Jersey, the 7th most influential economist in the world and the author of the famous book Thinking: Fast and Slow, died in his family circle 22 days after his nineties, reports The Washington Post.

Professor of Behavioral Sciences and Public Policy Eldar Shafir said of Kahneman that he was a giant in the field, a Princeton star, a good person and a great colleague and friend. “Since his arrival in the field, a large part of the social sciences is not what it used to be. He will be greatly missed,” said Shafir.

Kahneman’s work on the psychology of judgment and decision-making, popularized by his award-winning 2011 book Thinking: Fast and Slow, laid some of the early foundations for the field of behavioral economics, the modern behavioral sciences and their applications to policy, the Center for Behavioral Science and Public Policy said in a statement Kahneman-Treisman at Princeton University, which the late Nobel laureate covered by name.

“We are proud that the Center bears his name along with that of his wife, Anne Treisman, a distinguished Princeton scholar who died in 2018. Planning for a celebration of Kahneman’s life and work on campus will begin soon,” added the Princeton University Center .

Kahneman was awarded the 2002 Nobel Prize in Economic Sciences for his research that bridged the fields of psychology and economics. The Palestinian native, who comes from Tel Aviv and grew up in Paris, was named the 7th most influential economist in the world in 2015 by the prestigious magazine The Economist.

During his youth he decided to enter the military service, in 1954 he was commissioned as a lieutenant, then became a platoon leader and finally a psychologist in the Israeli army. Among his main duties was to participate in the selection of candidates for the officer school and also to compile a series of tests for this purpose. He used the methods used by the British Army in World War II. The basic principles of his methods are still used by the Israeli army today.

He also earned a bachelor’s degree in psychology and mathematics from the Hebrew University of Jerusalem in 1954, followed by a doctorate in psychology from the University of California, Berkeley. Subsequently, he returned to both universities, but already as a professor or lecturer in psychology.

Kahneman joined Princeton University in 1993, after working at the Hebrew University, the University of British Columbia (where he also became an associate professor) and the University of California, Berkeley. He was appointed professor in the Department of Psychology and at the Woodrow Wilson School of Public and International Affairs (now SPIA) and, with Shafir, created the first psychology course for politicians, which is still taught there today.

Kahneman’s list of awards is long. In 2013, President Barack Obama awarded him the Presidential Medal of Freedom. Kahneman was also elected a member of the National Academy of Sciences (2001), the American Philosophical Society (2004) and the British Academy (2008). The American Academy of Sciences and Arts honored him with the Talcott Parsons Award (2011), the American Psychological Association awarded him several awards for excellence, and awarded him numerous honorary degrees.

Prospect Theory and Thinking: Fast and Slow

The Nobel laureate drew the most attention to himself with the “prospect theory”, which is a behavioral economic theory based on the principle of systematic choice that people most often make. The theory describes a way of thinking about profit and loss, success and failure, not based on objective probability calculations, but based on the behavior of ordinary people, a kind of subjective probability. It combines psychological perspectives with economic ones and introduces the so-called “psychovalue”. It consists of three cognitive principles that influence the evaluation of financial results and are also part of many processes of perception, emotions and judgments.

These principles distinguish prospect theory from the model of maximizing expected utility. Each of these principles in itself represents an interesting observation that can explain some economic phenomena considered to be anomalies. Key principles include the reference point principle, decreasing sensitivity and loss aversion.

His already mentioned book Thinking: Fast and Slow is also worth paying attention to. It divides human thinking into two separate systems. The first system works automatically and quickly, without a sense of intentional control, with very little or no effort. It is intuitive, therefore it cannot be turned off, and its main component is associative memory, thanks to which this system constantly checks everything that happens around us and subsequently attributes and creates logical interpretations of these phenomena.

The second system is slow and analytical, paying attention to conscious mental activities that require a sense of control. It also often rationalizes and explains the often irrational decisions made by the first system.