Toda una vida deshaciendo errores. Daniel Kahneman (1934-2024) – In memoriam

This article wants to pay tribute to who, together with his inseparable friend, who died prematurely in 1996, Amos TverskyHe presides, without a doubt, over the pantheon of the intellectual fathers of the discipline that we know as behavioral or behavioral economics and that, today, for some authorsin fact you are already integrated into the economy ‘conventional’. Hence, I have taken the liberty of paraphrasing at the head of this obituary prompted by the recent death of Daniel Kahneman, the title that Michael Lewis’s book received in its Spanish edition: “Undoing mistakes: Kahneman, Tversky and the friendship that taught us how the mind works”.

As is known, Kahneman was awarded the Bank of Sweden Prize in Economic Sciences in memory of Alfred Nobel in 2002 for “having integrated the knowledge of psychological research into economic science, especially with regard to human judgment and decision-making under conditions of uncertainty”. This is, in fact, the ‘impulse’ or fundamental drive of behavioral economics. It is not unfortunate, therefore, that in Spain one of the works of Richard Thaler – another of the behavioral deities of Olympus, also Nobel Prize in Economics in 2017– as “Everything I have learned with economic psychology”Well, in reality the DNA of the discipline is psychological.

While we can trace the genome of behavioral economics in the works of, among other precursors, Adam Smith, John Maynard Keynes and, most particularly, Herbert SimonIt is the contributions of Kahneman and Tversky, Tversky and Kahneman, so much, so much, that have allowed us to obtain “Maps of bounded rationality”as Kahneman himself proclaimed in the lecture he gave during the ceremony for awarding his Nobel Prize.

Although Kahneman has made valuable contributions beyond those achieved during his fruitful collaboration with Tversky, It is the forging between the two that made him worthy of the Nobel Prize; contributions that are summarized in two major milestones, which are briefly described below:

• The research program in heuristics and biases;
• The “prospective” theory (possible theory).

Heuristics are mental shortcuts, a quick (and ecological, that is, adapted to the environment) way of reasoning that in most cases leads to satisfactory decisions (e.g. when a doctor at the emergency room door has to decide in seconds how to stabilize a patient in critical condition), but in certain cases they lead to systematic errors that we call biases. A clear example was provided by the COVID-19 pandemic when in the initial stages of the spread of the coronavirus we attributed to it the contagiousness and lethality of a well-known virus, the one that we had most available in our minds, the flu virus. Hence the heuristic behind this bias is called availability heuristicbeing one of the three described, along with the representativeness heuristic and to anchoring bias and underfitin it seminal work that Tversky and Kahneman published in Science in 1974.

The originality of this research program on heuristics and biases lay not only in its own object, but also in the methodology (unpublished until then) that Kahneman and Tversky deployed, consisting of contrasting previous hypotheses based on rational rules such as, for example, Bayes’ theorem, through hypothetical questions asked to a sample of individuals. Yeah Einstein had his thought experiments or Experimental experiments, through which he shaped his theory of relativity, Kahneman and Tversky had their hypothetical experiments with which they mapped the architecture of cognition. that “Think fast, think slow” that Kahneman would become a best seller in 2011.

The article by Tversky and Kahneman (1974) is, according to a recent publication, the third most influential work in behavioral economics. The second would be the famous book ‘Push’ by Thaler and Sunstein. And the most cited, at the top of the podium, would be the article that Kahneman and Tversky published in 1979 entitled “Prospect theory: an analysis of decision under risk.«. The prospect theory outlined by Kahneman and Tversky is considered the most powerful descriptive theory of human choices, in contexts of risk and uncertainty, available to us. Thus, many of the paradoxes or deviations in the elections observed with respect to those predicted by the normative theory par excellence –expected utility theory– can be explained in light of the psychological principles introduced by Kahneman and Tversky. These principles are three: first, individual preferences are contingent or relative to a reference point, with respect to which the potential results of the elections are evaluated as losses or gains; Linked to this, secondly, losses outweigh gains, a principle called ‘loss aversion’; Finally, probabilities are processed subjectively in a non-linear way.

All these psychological principles, mathematically modeled as part of prospective utility functions, have allowed us to verify, for example, that traditional procedures that we have been using for decades in health economics (e.g. the lottery or standard game) to measure the utilities of health states that must be used to evaluate the cost-utility of medical interventions, skew the profits obtained, which can seriously distort financing and pricing decisions for new drugs.

Kahneman and Tversky, two brilliant scientists whose friendship truly served to change our perception of how we reason and process information. As Bentham states: “But I have planted the tree of usefulness. “I have planted it deep and spread it widely.”We can well say of these two giants that they deeply planted the tree of behavioral economics, and that they extended it to unsuspected limits.