The thirty-five chapters in this book describe various judgmental heuristics and the biases they produce, not only in laboratory experiments but in important...

This article described three heuristics that are employed in making judgements under uncertainty: representativeness, which is usually employed when people are asked to judge the probability that an object or event A belongs to class or process B; availability of instances or scenarios, which is often employed when people are asked to assess the frequency of a class or the plausibility of a particular development; and adjustment from an anchor, which is usually employed in numerical prediction when a relevant value (...) is available. These heuristics are highly economical and usually effective, but they lead to systematic and predictable errors. A better understanding of these heuristics and of the biases to which they lead could improve judgements and decisions in situations of uncertainty. (shrink)

Considers that intuitive predictions follow a judgmental heuristic-representativeness. By this heuristic, people predict the outcome that appears most representative of the evidence. Consequently, intuitive predictions are insensitive to the reliability of the evidence or to the prior probability of the outcome, in violation of the logic of statistical prediction. The hypothesis that people predict by representativeness was supported in a series of studies with both naive and sophisticated university students. The ranking of outcomes by likelihood coincided with the ranking by (...) representativeness, and Ss erroneously predicted rare events and extreme values if these happened to be representative. The experience of unjustified confidence in predictions and the prevalence of fallacious intuitions concerning statistical regression are traced to the representativeness heuristic. (shrink)

In the international bestseller, Thinking, Fast and Slow, Daniel Kahneman, the renowned psychologist and winner of the Nobel Prize in Economics, takes us on a groundbreaking tour of the mind and explains the two systems that drive the way we think. System 1 is fast, intuitive, and emotional; System 2 is slower, more deliberative, and more logical. The impact of overconfidence on corporate strategies, the difficulties of predicting what will make us happy in the future, the profound effect of cognitive (...) biases on everything from playing the stock market to planning our next vacation—each of these can be understood only by knowing how the two systems shape our judgments and decisions. -/- Engaging the reader in a lively conversation about how we think, Kahneman reveals where we can and cannot trust our intuitions and how we can tap into the benefits of slow thinking. He offers practical and enlightening insights into how choices are made in both our business and our personal lives—and how we can use different techniques to guard against the mental glitches that often get us into trouble. Winner of the National Academy of Sciences Best Book Award and the Los Angeles Times Book Prize and selected by The New York Times Book Review as one of the ten best books of 2011, Thinking, Fast and Slow is destined to be a classic. (shrink)

Is our case strong enough to go to trial? Will interest rates go up? Can I trust this person? Such questions - and the judgments required to answer them - are woven into the fabric of everyday experience. This book, first published in 2002, examines how people make such judgments. The study of human judgment was transformed in the 1970s, when Kahneman and Tversky introduced their 'heuristics and biases' approach and challenged the dominance of strictly rational models. Their work highlighted (...) the reflexive mental operations used to make complex problems manageable and illuminated how the same processes can lead to both accurate and dangerously flawed judgments. The heuristics and biases framework generated a torrent of influential research in psychology - research that reverberated widely and affected scholarship in economics, law, medicine, management, and political science. This book compiles the most influential research in the heuristics and biases tradition since the initial collection of 1982. (shrink)

The program of research now known as the heuristics and biases approach began with a study of the statistical intuitions of experts, who were found to be excessively confident in the replicability of results from small samples. The persistence of such systematic errors in the intuitions of experts implied that their intuitive judgments may be governed by fundamentally different processes than the slower, more deliberate computations they had been trained to execute. The ancient idea that cognitive processes can be partitioned (...) into two main families--traditionally called intuition and reason--is now widely embraced under the general label of dual-process theories. Dual-process models come in many flavors, but all distinguish cognitive operations that are quick and associative from others that are slow and governed by rules. To represent intuitive and deliberate reasoning, we borrow the terms "system 1" and "system 2" from Stanovich and West. In the following section, we present an attribute-substitution model of heuristic judgment, which assumes that difficult questions are often answered by substituting an answer to an easier one. Following sections introduce a research design for studying attribute substitution, as well as discuss the controversy over the representativeness heuristic in the context of a dual-system view that we endorse. The final section situates representativeness within a broad family of prototype heuristics, in which properties of a prototypical exemplar dominate global judgments concerning an entire set. (shrink)

The first section introduces a distinction between 2 families of cognitive operations, called System 1 and System 2. The second section presents an attribute-substitution model of heuristic judgment, which elaborates and extends earlier treatments of the topic. The third section introduces a research design for studying attribute substitution. The fourth section discusses the controversy over the representativeness heuristic. The last section situates representativeness within a broad family of prototype heuristics, in which properties of a prototypical exemplar dominate global judgments concerning (...) an entire set. (shrink)

This book presents the definitive exposition of 'prospect theory', a compelling alternative to the classical utility theory of choice. Building on the 1982 volume, Judgement Under Uncertainty, this book brings together seminal papers on prospect theory from economists, decision theorists, and psychologists, including the work of the late Amos Tversky, whose contributions are collected here for the first time. While remaining within a rational choice framework, prospect theory delivers more accurate, empirically verified predictions in key test cases, as well as (...) helping to explain many complex, real-world puzzles. In this volume, it is brought to bear on phenomena as diverse as the principles of legal compensation, the equity premium puzzle in financial markets, and the number of hours that New York cab drivers choose to drive on rainy days. Theoretically elegant and empirically robust, this volume shows how prospect theory has matured into a new science of decision making. (shrink)

In contrast to logical criteria of rationality, which can be assessed entirely by reference to the system of preferences, substantive criteria of rational choice refer to an independent evaluation of the outcomes of decisions. One of these substantive criteria is the experienced hedonic utility of outcomes. Research indicates that people are myopic in their decisions, may lack skill in predicting their future tastes, and can be led to erroneous choices by fallible memory and incorrect evaluation of past experiences. Theoretical and (...) practical implications of these challenges to the assumption of economic rationality are discussed. (shrink)

This book draws together the latest work from scholars around the world using subjective well-being data to understand and compare well-being across countries and cultures. Starting from many different vantage points, the authors reached a consensus that many measures of subjective well-being, ranging from life evaluations through emotional states, based on memories and current evaluations, merit broader collection and analysis. Using data from the Gallup World Poll, the World Values Survey, and other internationally comparable surveys, the authors document wide divergences (...) among countries in all measures of subjective well-being, The international differences are greater for life evaluations than for emotions. Despite the well-documented differences in the ways in which subjective evaluations change through time and across cultures, the bulk of the very large international differences in life evaluations are due to differences in life circumstances rather than differences in the way these differences are evaluated. (shrink)

The target article focuses exclusively on System 2 and on reasoning rationality: the ability to reach valid conclusions from available information, as in the Wason task. The decision-theoretic concept of coherence rationality requires beliefs to be consistent, even when they are assessed one at a time. Judgment heuristics belong to System 1, and help explain the incoherence of intuitive beliefs.

Moral intuitions operate in much the same way as other intuitions do; what makes the moral domain is distinctive is its foundations in the emotions, beliefs, and response tendencies that define indignation. The intuitive system of cognition, System I, is typically responsible for indignation; the more reflective system, System II, may or may not provide an override. Moral dumbfounding and moral numbness are often a product of moral intuitions that people are unable to justify. An understanding of indignation helps to (...) explain the operation of the many phenomena of interest to law and politics: the outrage heuristic, the centrality of harm, the role of reference states, moral framing, and the act-omission distinction. Because of the operation of indignation, it is extremely difficult for people to achieve coherence in their moral intuitions. Legal and political institutions usually aspire to be deliberative, and to pay close attention to System II; but even in deliberative institutions, System I can make some compelling demands. (shrink)