The psychologist Daniel Kahneman won the Nobel Memorial Prize in Economic Sciences in 2002.
His book Thinking Fast & Slow distills his work on human decision making. In doing so, it highlights both the brilliance & limitations of the human mind.
Here’s a summary.
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Kahneman begins by introducing the mind’s two modes of thought.
System 1 is automatic, fast, unconscious & effortless.
System 2 is deliberate, slow, conscious & effortfull.
The first accounts for around 95% of all our mental processing. The second, 5%.
To operate efficiently, System 1 uses shortcuts to produce “good enough” solutions whilst expending as little time & energy as possible.
This creates imperfections in human decision making that economists, and their rational-agent perspective, rarely account for.
Here’s 12:
01: Priming
System 1 is an associative machine. When presented with a word such as “lime”, it will easily generate others, such as “green” or “sour”.
This makes us susceptible to priming, in which a common association is invoked to move us in a given direction.
02: Cognitive Ease
System 1 welcomes information which is more easily processed.
Cognitive ease can arise from repetition and simplicity. Even falsehoods will be accepted if they are simple and familiar enough to be effortlessly processed.
