DANIEL KAHNEMAN: BIOGRAPHY AND MAIN THEORIES - PSYCHOLOGY - 2025

Daniel Kahneman (Israel, 1934) is a psychologist of Israeli origin, nationalized as an American, recognized for his brilliant career. His most relevant work has been to integrate the psychological analysis of human behavior into economic science.

In fact, it was his research on human judgment and decision-making that earned him the 2002 Nobel Prize in Economics, along with Vernon Smith, despite not being an economist.

Daniel Kahneman's works on the way of thinking of human beings have influenced many fields and have even opened the way for other types of disciplines such as neuroscience, a field that seeks to explain that the brain guided by a more irrational instinct is responsible of financial swings.

In addition to being the recipient of the Nobel Prize in Economics and being the founder of behavioral economics, Kahneman is a member of the United States National Academy of Sciences, the American Academy of Arts and Sciences, the Philosophical Society, of the American Psychological Society, the American Psychological Association, the Society of Experimental Psychologists and the Econometric Society.

In 2012, Daniel Kahneman joined the Royal Academy of Economic and Financial Sciences of Spain as an academic and was included in the list of the 100 most influential global thinkers, named by Foreign Policy magazine.

Birth and childhood

The son of Jewish parents of Lithuanian origin, Kahneman was born in Tel Aviv in 1934, while his mother was visiting relatives. His home was Paris, France, where his parents had emigrated in the early 1920s. His father worked as a head of research in a large chemical factory.

Kahneman lived through the terror of World War II. His father was arrested during the city's first major raid against Jews in 1942. He was held prisoner for six weeks at Drancy, a way station for the death camps.

However, he was released after the intervention of the company where he worked, since –as Kahneman learned a long time later- said firm was run by the financial pillar of the anti-Semitic fascist movement in France.

After that experience, the family escaped and moved to Vichy France. They were relatively safe there, until once again the Germans arrived and had to flee to central France.

In 1944, Kahneman's father died as a result of not being properly treated for his diabetes, within weeks of D-Day. After the Allied victory, he and his mother, sister, and were reunited with the rest of their family in Palestine..

The beginnings of his career

Daniel Kahneman became interested in psychology from his teens. However, the questions that interested him at that time were more oriented to the philosophical world, questions like, what was the meaning of life, the existence of God and the reasons for not misbehaving. But soon his interests changed.

He no longer cared much about knowing if God existed, but rather understanding what it was that made people believe in him. He was also interested in discovering the origins of people's convictions about what is right or wrong, and not learning about ethics. Finally when he went to career counseling, the first recommendation was psychology.

Kahneman graduated as a Bachelor of Psychology with a specialty in Mathematics from the Hebrew University of Jerusalem in 1954. After completing his studies, he entered military service in the newly established State of Israel. There he conducted research on a recruitment interview system, which remained in force for several decades.

In 1956 he moved to the United States, thanks to a scholarship awarded to him at the Hebrew University to do a doctorate and thus be able to teach in the Department of Psychology. In 1961 she obtained her degree at the University of Berkeley, in California, and that same year she joined as a professor in Psychology at the Hebrew University of Jerusalem, where she held various positions.

In 1978 he moved to Canada to occupy the position of Professor of Psychology at the University of British Columbia. He worked there until 1986, when he joined the faculty at Berkeley University, where he stayed until 1994. Today Kahneman is a professor and researcher in the Department of Psychology at Princeton University.

Perspective theory

Kahneman recently at a conference. Source: קובי קואנקס

Daniel Kahneman is considered one of the pioneers of the analysis of human behavior when making decisions in environments of uncertainty, a postulate that departs from the basic principles of probability.

This work, which would later become the basis for winning the Nobel Prize in Economics, was the result of joint research with Amos Tversky, a cognitive psychologist and mathematician of Israeli origin, a forerunner of cognitive science.

In 1979, Kahneman and Tversky developed the Prospect Theory or Perspectives Theory, in which they explained the decision-making process of individuals. The theory describes the way in which people make their decisions when they are in situations where they must decide between alternatives that involve risk, such as financial decisions.

Utility theory

Until then, economists explained people's decisions through utility theory, a postulate that works with a simplistic version of the human being.

According to this theory, a person, in their decision making, is rational, selfish and does not change preferences. For Kahneman, as a psychologist, this was a theory that did not make sense, so he worked to formulate a theory that better explain that reality.

From the point of view of psychology, it is clear that the human being is neither perfectly rational nor completely selfish. It is also not true that it does not change preferences, since in fact it does so very often.

Heuristic shortcuts

Kahneman. Source: Ohadinbar

Contrary to what utility theory holds about decision-making, Kahneman claims that people do not always make objective choices. In addition, it indicates that people are not only not rational at all times, but there are also emotions such as fear, hatred and affection that move them away from rationality.

In their perspective theory, Kahneman and Tversky called these decisions heuristic shortcuts. In psychology, a heuristic is a rule that is followed unconsciously so that, through reformulation, a problem posed can be simplified and thus solved.

This theory is based on three basic principles: aversion to losing, asymmetric risk preferences, and wrong estimation of probabilities.

• The first principle has to do with the fact that the pain for a loss is greater than the joy felt for a gain.
• The second is based on the fact that people prefer not to bet when they are winning, but on the contrary they risk more when they are losing.
• And the latter is based on the thought that some events have a greater chance of happening than they actually do.

Thinking, Fast and slow: a brain with two systems

Thinking, Fast and Slow or Think fast, think slowly in Spanish, has been the work with which Daniel Kahneman has synthesized five decades of study as an experimental psychologist on the intuitive and rational behavior of the human being.

In this book the author focuses on the study of cognitive illusions, that is, of those false beliefs that people intuitively accept as true.

Kahneman says that although we have only one brain, we have two systems of thought. System 1 is fast, intuitive and emotional, it is capable of providing conclusions automatically. System 2, for its part, is slower, more effortful and rational, it is that of conscious responses.

Kahneman's theories have influenced what is known as behavioral economics, which is nothing more than a current that tries to show that the world of finance is not as predictable as it seems.

Although for classical theories of economics economic agents always act rationally, behavioral studies have shown that this is not the case. People's judgments are cognitively, emotionally and socially conditioned, and this happens without being aware of it.

System 1 and 2 and influence on behavior

Regarding System 1 and System 2, it is difficult to know when one or the other has taken the reins of behavior.

In a person's day-to-day life, most of the judgments he makes come from System 1, since they occur intuitively, automatically and with an emotional component. The problem is that not all the time you can think with this system, since although it allows us to function reasonably, it also generates all kinds of erroneous intuitions.

System 2 is the only one that allows you to solve difficult problems, but for this you must learn to postpone the suggestions of the emotional system and invest a great cognitive effort.

If you do not do it and think more with System 1 (prepared to believe and not doubt), you can fall into one of the many cognitive errors. The author explains that people tend to be very confident in judgments they make based on very little information.

This is why one of the most common cognitive errors occurs, the halo effect. It involves the attribution of excessively negative or positive characteristics to a person based only on partial clues. An example of this is the irrational love that some people have for singers or movie stars.

For Kahneman, this trust and belief is one of the most important aspects of cognition. While it is wonderful that one is able to generate quick interpretations, that makes one unaware of what is not known.

Experience versus memory: the perception of happiness

Think Fast, Think Slow is a tome that presents Daniel Kahneman's main findings on the way of thinking of human beings.

Human reasoning is an intricate process that leads to evaluating and analyzing many aspects of life. And more than talking about the two ways of thinking, the psychologist has also spoken in this book about the findings that psychology has contributed to the concept of happiness.

Today happiness is something that everyone seeks to decipher. There are many books that talk about it and how to find it. However, Kahneman explains in this work the importance of not confusing experience and memory, since doing so can cause a misunderstanding of what happiness is.

Experiences and memories

Daniel Kahneman affirms that it is necessary to learn to distinguish the lived experiences of the memories that one has of those experiences. They are two different entities, and confusing them is part of the problem with the notion of happiness.

Experiences are the moments that are part of the present, which only last a few seconds. And memories are nothing more than the ways in which we evaluate those experiences.

Therefore, in order to differentiate these elements, the author proposes to think of two selves, which are the "me that has experiences" and the "me that remembers. Although both entities are important in judging happiness, each perceives it differently.

While the "I that has experiences" is responsible for registering the sensations that one has, the "I that remembers" is in charge of making sense of those experiences.

Sometimes what is experienced in each moment can be very different from what is remembered, since the "I that remembers" can be affected by elements such as the duration or intensity of the moments lived. So the author affirms that the two selves have different notions of happiness.