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The Quirkiness of Human Judgment

Although he never took an economics course, Princeton psychologist Daniel Kahneman received the Nobel Prize in economic sciences in 2002. The award recognized Kahneman’s life-long work in integrating psychological research and economic science. His work showed economists how people don’t always make reasoned choices, over-turning long held views and opening up a new field of research.

Kahneman has studied the importance of context in decision-making and the shortcuts people take ever since the 1970’s, when he began publishing his groundbreaking work with the late Amos Tversky. His findings on the psychological motives that determine decisions have implications for economists, especially in areas such as individual savings behavior or participation in the stock market.
Kahneman and Tversky's landmark paper on decision-making under circumstances where there is uncertainty was published in Econometrica in 1979. Prior to this publication, economists assumed humans made rational decisions. Economics was also a non-experimental science that relied on real-world observations. Today, largely because of Kahneman’s work, experimental economics is burgeoning.
Kahneman notes that his research has had a wide impact because his paper was published in an economics rather than a psychology journal. “It legitimized a certain approach to thinking about decision-making, which eventually, through the work of other economists, became influential in economics itself,” he says.

In an article based on his Nobel Prize lecture, published in American Psychologist (September, 2003), Kahneman reviews studies on intuitive judgment and decision- making in the context of two related concepts. These are accessibility (the ease with which thoughts come to mind) and the distinction between effortless intuition and deliberate reasoning.

His paper shows how the psychology of judgment and the psychology of choice share basic principles, once again drawing together lines of research that are usually studied separately.

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