Daniel Kahneman’s 2002 Nobel Memorial Prize in Economic Sciences was a remarkable achievement — especially given that he never took an economics class. A psychologist by training, Kahneman devoted his life to uncovering the cognitive biases and heuristics that plague our everyday decision-making. He is now a professor emeritus at Princeton University. On Wednesday afternoon, Kahneman delivered a lecture at SSS entitled “A Psychological Perspective on Rationality,” in which he discussed ways to think about the irrational human mind. That night, WEEKEND asked Kahneman about his work, legacy and wife.
Q. In the 1970s, prospect theory, the work that earned you a Nobel Prize in 2002, challenged one of the pillars of economic models that humans are “rational” decision makers. What was it like to publish something so intellectually revolutionary so early in your career?
A. Well, we didn’t know it was going to have as much influence as it turned out to have. We thought it was a pretty good paper, but we didn’t think it was going to be as huge, which, in a way, it turned out to be. It wasn’t really that early in my career, either. I was 35, I think, when prospect theory appeared, and that’s a prime age for a scientist.
Q. When did you realize that prospect theory was here to stay?
A. I think it dawned on us gradually. The most important development was actually that Richard Thaler, who is now guru of behavioral economics as I mentioned, became interested in it. He saw ways of applying the theory to interesting problems. That was the beginning of it. Within a few years after that, we had a pretty clear view that something significant was going to come out of it, but what came out of it primarily was that Dick Thaler sort of injected behavioral economics. He spent a year in Vancouver with me, in 1984 and 1985, during which we did some very good work, and I learned some economics. Some people trace behavioral economics to that year, or to 1980, when Dick Thaler wrote the first paper that used prospect theory to apply to the theory of the consumer.
Q. Prospect theory has been widely adopted beyond academia. In particular, marketers have become particularly fond of some of the cognitive biases you documented. What do you think are the ethical implications of exploiting these vulnerabilities you document in order to make us buy bigger lattes or a second box of cereal?
A. I would say that I doubt very much that anybody who is marketing learned completely new tricks from us. They are of course intellectual tools, and they can be used in very different ways, for good ends and for bad ends. You will find people who are looking for ways of helping people by helping people avoid mistakes that they would otherwise make. The academic marketers are studying it because they are behavioral scientists, and to the extent that they are using it, it would be more to the effect of protecting consumers than to exploit them.
Q. Britain has created a “Behavioral Insights Team” to leverage the products of prospect theory to improve public policy. Do you think such “libertarian paternalism” is incompatible with American wariness of the nanny state, or will we see one in time?
A. There is more opposition to paternalism in the United States than in the United Kingdom generally, but libertarian paternalism exists in the United States. One of the authors of the book “Nudge,” Cass Sunstein, was chief of regulation in the Obama White House during the first administration. He actually implemented the ideas of “Nudge,” of the ideas of libertarian paternalism. That aspect of behavioral economics doesn’t directly extend from prospect theory and from our work. What happened was that all these ideas in some sense buttress each other, and so the influence on the field of academics and on the field of policy came from all these ideas at the same time.
Q. If you could pose one research question about the mind to the next generation of researchers, what would it be?
A. I think the question that was very much on my mind when I retired from academic research was the interaction between health and psychological well-being and to what extent does psychological well-being influence health. That is certainly one of the questions that should be answered. I think that there are many questions in well-being that I was very interested in at the end of my career. In terms of judgment and decision-making, I think the big developments are going to come from neuroscience, at least that would be my prediction. There is a different thing called neuroeconomics, which is at a very early stage of development right now, but that I expect will develop a great deal in the future and that we will learn a lot about how decisions are made from a close examination of the brain.
Q. Neuroscience has taken off in recent years and seems to have become the sexiest way to learn about the mind and brain. A few days ago, as well, we learned that the Obama administration will propose a billion-dollar initiative to map the brain in greater detail than ever before. Do you think that neuroscience and its flashy techniques and pretty pictures hold continued promise, or is our fascination with the discipline preventing us from perhaps asking other important questions about the brain?
A. I’m not enough of an expert on fMRI and alternative techniques to evaluate their relative usefulness, but it’s clear that the field is in its infancy. We are seeing things that we could not see before, but we are not seeing nearly as far as we are going to be able to see when the methods are developed.
Q. You have been married to Anne Triesman, another prominent psychologist, since 1977. All else being equal, would you recommend marrying somebody in the same academic discipline?
A. I certainly would not recommend it in general. I think it creates major complications for academic couples in general simply because it is so difficult for two people to get a job in the same place. As it happens, it wasn’t difficult for my wife and myself because we got together at an advanced stage of our career, so we were reasonably well-known. For people who are graduate students together, life is really quite difficult.