Daniel Kahneman, Who Plumbed the Psychology of Economics, Dies at 90


Daniel Kahneman, who never took an economics course but who pioneered a psychologically based branch of that field that led to a Nobel in economic science in 2002, died on Wednesday. He was 90.

His death was confirmed by his partner, Barbara Tversky. She declined to say where he died.

Professor Kahneman, who was long associated with Princeton University and lived in Manhattan, employed his training as a psychologist to advance what came to be called behavioral economics. The work, done largely in the 1970s, led to a rethinking of issues as far-flung as medical malpractice, international political negotiations and the evaluation of baseball talent, all of which he analyzed, mostly in collaboration with Amos Tversky, a Stanford cognitive psychologist who did groundbreaking work on human judgment and decision-making. (Ms. Tversky, also a professor of psychology at Stanford, had been married to Professor Tversky, who died in 1996. She and Professor Kahneman became partners several years ago.)

As opposed to traditional economics, which assumes that human beings generally act in fully rational ways and that any exceptions tend to disappear as the stakes are raised, the behavioral school is based on exposing hard-wired mental biases that can warp judgment, often with counterintuitive results.

“His central message could not be more important,” the Harvard psychologist and author Steven Pinker told The Guardian in 2014, “namely, that human reason left to its own devices is apt to engage in a number of fallacies and systematic errors, so if we want to make better decisions in our personal lives and as a society, we ought to be aware of these biases and seek workarounds. That’s a powerful and important discovery.”

Professor Kahneman delighted in pointing out and explaining what he called universal brain “kinks.” The most important of these, the behaviorists hold, is loss-aversion: Why, for example, does the loss of $100 hurt about twice as much as the gaining of $100 brings pleasure?

Among its myriad implications, loss-aversion theory suggests that it is foolish to check one’s stock portfolio frequently, since the predominance of pain experienced in the stock market will most likely lead to excessive and possibly self-defeating caution.

Loss-aversion also explains why golfers have been found to putt better when going for par on a given hole than for a stroke-gaining birdie. They try harder on a par putt because they dearly want to avoid a bogey, or a loss of a stroke.

Mild-mannered and self-effacing, Professor Kahneman not only welcomed debate on his ideas; he also enlisted the help of adversaries as well as colleagues to perfect them. When asked who should be considered the “father” of behavioral economics, Professor Kahneman pointed to the University of Chicago economist Richard H. Thaler, a younger scholar (by 11 years) whom he described in his Nobel autobiography as his second most important professional friend, after Professor Tversky.

“I’m the grandfather of behavioral economics,” Professor Kahneman allowed in a 2016 interview for this obituary, in a restaurant near his home in Lower Manhattan.

This new school of thought did not get its first major public airing until 1985, in a conference at the University of Chicago Graduate School of Business, a bastion of traditional economics.

Professor Kahneman’s public reputation rested heavily on his 2011 book “Thinking, Fast and Slow,” which appeared on best-seller lists in science and business. One commentator, the essayist, mathematical statistician and former option trader Nassim Nicholas Taleb, author of the influential book on improbability “The Black Swan,” placed “Thinking” in the same league as Adam Smith’s “The Wealth of Nations” and Sigmund Freud’s “The Interpretation of Dreams.”

The author Jim Holt, writing in The New York Times Book Review, called “Thinking” “an astonishingly rich book: lucid, profound, full of intellectual surprises and self-help value.”

Shane Frederick, a professor at the Yale School of Management and a Kahneman protégé, said by email in 2016 that Professor Kahneman had “helped transform economics into a true behavioral science rather than a mere mathematical exercise in outlining the logical entailments of a set of often wildly untenable assumptions.”

Professor Kahneman propagated his findings with an appealing writing style, using illustrative vignettes with which even lay readers could engage.

He and Professor Thaler pondered, for example, such questions as why taxi drivers often work longer hours when pickings are slim but quit early when rain-soaked pedestrians are desperate for rides. The explanation was that many drivers have a fixed daily income target and will retire for the day when they reach it; loss-aversion suggests that they will work longer, to reach that goal, when passengers are scarce.

Professor Kahneman wrote that Professor Thaler had inspired him to study, as an experiment, the so-called mental accounting of someone who arrives at the theater and realizes that he has lost either his ticket or the cash equivalent. Professor Kahneman found that people who lost the cash would still buy a ticket by some means, while those who lost an already purchased ticket would more likely go home.

Professor Thaler won the 2017 Nobel in economic science — officially the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel. Professor Kahneman shared his 2002 Nobel with Vernon L. Smith of George Mason University in Virginia. “Had Tversky lived, he would certainly have shared the Nobel with Kahneman, his longtime collaborator and dear friend,” Professor Holt wrote in his 2011 Times review. Professor Tversky died in 1996 at 59.

Much of Professor Kahneman’s work is grounded in the notion — which he did not originate but organized and advanced — that the mind operates in two modes: fast and intuitive (mental activities that we’re more or less born with, called System One), or slow and analytical, a more complex mode involving experience and requiring effort (System Two).

Others have personified these mental modes as Econs (rational, analytical people) and Humans (emotional, impulsive and prone to exhibit unconscious mental biases and an unwise reliance on dubious rules of thumb). Professor Kahneman and Professor Tversky used the word “heuristics” to describe these rules of thumb. One is the “halo effect,” where in observing a positive attribute of another person one perceives other strengths that aren’t really there.

“Before Kahneman and Tversky, people who thought about social problems and human behavior tended to assume that we are mostly rational agents,” the Times columnist David Brooks wrote in 2011. “They assumed that people have control over the most important parts of their own thinking. They assumed that people are basically sensible utility-maximizers, and that when they depart from reason it’s because some passion like fear or love has distorted their judgment.”

But Professors Kahneman and Tversky, he went on, “yielded a different vision of human nature.”

As Mr. Brooks described it: “We are players in a game we don’t understand. Most of our own thinking is below awareness.” He added: “Our biases frequently cause us to want the wrong things. Our perceptions and memories are slippery, especially about our own mental states. Our free will is bounded. We have much less control over ourselves than we thought.”

The work of Professor Kahneman and Professor Tversky, he concluded, “will be remembered hundreds of years from now.”

Daniel Kahneman was born on March 5, 1934, into a family of Lithuanian Jews who had emigrated to France to the early 1920s. After France fell to Nazi Germany in World War II, Daniel, like other Jews, was forced to wear a Star of David on the outside of his clothing. His father, the research chief in a chemical factory, was seized and interned at a way station before deportation to an extermination camp, but he was then released under mysterious circumstances. The family escaped to the Riviera and then to central France, where they lived in a converted chicken coop.

Daniel’s father died just before D-Day, in June 1944, and Daniel, by then an eighth-grader, and his sister, Ruth, wound up in British-controlled Palestine with their mother, Rachel. (Daniel had been born in Tel Aviv during an extended visit with relatives by his mother.)

He graduated from the Hebrew University of Jerusalem with a major in psychology, completing his college studies in two years. In 1954, after the founding of the state of Israel, he was drafted into the Israeli Defense Forces as a second lieutenant.

After a year as a platoon leader, he was transferred to the psychology branch, where he was given occasional assignments to assess candidates for officer training.

The unit’s ability to predict performance, however, was so poor that he coined the term “illusion of validity,” meaning a cognitive bias in which one displays overconfidence in the accuracy of one’s judgments. Two decades later this “illusion” became one of the most frequently cited elements in psychology literature.

He married Irah Kahan in Israel, and they soon set off for the University of California, Berkeley, where he had been granted a fellowship. He earned his Ph.D. in psychology there. He returned to Israel to teach at Hebrew University from 1961 to 1977. The marriage ended in divorce. (Professor Kahneman held dual citizenships, in the United States and Israel.)

In 1978, Professor Kahneman married Anne Treisman, a noted British psychologist who received the National Medal of Science in 2013 from President Barack Obama. She died in 2018. He and Ms. Treisman had long been friends with the Tverskys.

In addition to Ms. Tversky, he is survived by a son and daughter from his first marriage, Michael Kahneman and Lenore Shoham; two stepdaughters from his second marriage, Jessica and Deborah Treisman; two stepsons from the same marriage, Daniel and Stephen Treisman; three grandchildren; and four step-granddaughters. He lived in Greenwich Village for many years.

It was in Jerusalem, while developing a training course for Air Force flight instructors, that Professor Kahneman had “the most satisfying Eureka experience of my career,” as he wrote in an autobiographical sketch for the Nobel committee.

He had started to preach the traditional view that to promote learning, praise is more effective than punishment. But a seasoned colleague insisted otherwise, telling him, as Professor Kahneman recalled:

“On many occasions I have praised flight cadets for clean execution of some aerobatic maneuver, and in general when they try it again, they do worse. On the other hand, I have often screamed at cadets for bad execution, and in general they do better the next time. So please don’t tell us that reinforcement works and punishment does not, because the opposite is the case.”

The colleague had insisted — and convinced Professor Kahneman — that statistically people may do very well in something in one instance or very poorly in another, but that in the end they tend to regress to the mean, or average.

“This was a joyous moment, in which I learned an important truth about the world,” Professor Kahneman wrote. “Because we tend to reward others when they do well and punish them when they do badly, and because there is regression to the mean, it is part of the human condition that we are statistically punished for rewarding others and rewarded for punishing them.”

His collaboration with Professor Tversky — their peak productive years were 1971 to 1981 — was exceptionally close, so much so that it inspired the author Michael Lewis to write a book about them, “The Undoing Project: A Friendship That Changed Our Minds” (2016).

“Amos and I shared the wonder of together owning a goose that could lay golden eggs — a joint mind that was better than our separate minds,” Professor Kahneman wrote in his Nobel autobiography. Later, in “Thinking,” he wrote, “The pleasure we found in working together made us exceptionally patient; it is much easier to strive for perfection when you are never bored.”

Mr. Lewis reported that the two men worked on a single typewriter, often amid uproarious laughter and shouts in Hebrew and English, and that they had sometimes flipped a coin to determine whose name would be listed first on a paper.

But they also feuded, particularly when Professor Kahneman thought he was being denied proper credit. One falling-out lasted years, ending finally with a reconciliation. Professor Kahneman was solicitous during his colleague’s final illness (he died of metastatic melanoma) and was his main eulogist at his funeral in 1996.

One product of their collaboration was a finding that overconfidence in conjunction with optimism is an extremely common bias, which leads people to think that wars are quickly winnable and that building projects will be completed on budget. But Professor Kahneman and Professor Tversky considered such bias necessary in the end for capitalism to function.

Professor Kahneman’s North American career included teaching posts at the University of British Columbia and Berkeley before he joined the Princeton University faculty in 1993.

His most recent book is “Noise: A Flaw in Human Judgment” (2021), written with Cass Sunstein and Olivier Sibony. In The Times Book Review, Steven Brill called it a “tour de force of scholarship and clear writing.”

The book looks at how human judgment often varies wildly even among specialists, as reflected in judicial decisions, insurance premiums, medical diagnoses and corporate decisions, as well as in many other aspects of life.

And it distinguishes between predictable biases — a judge, for example, who consistently sentences Black defendants more harshly — and what the authors call “noise”: less explainable decisions resulting from what they define as “unwanted variability in judgments.” In one example, the authors report that doctors are more likely to order cancer screenings for patients they see early in the morning than late in the afternoon.

The book, like his others, was an outgrowth of Professor Kahneman’s lifelong quest to understand how the human mind works — what thought processes lead people to make the kinds of decisions and judgments they do as they navigate a complex world. And toward the end of his life he acknowledged that so much more was to be known.

In an interview with Kara Swisher on her Times podcast “Sway” in 2021, he said, “If I were starting my career now, I would be choosing between artificial intelligence and neuroscience, because those are now particularly exciting ways of looking at human nature.”

Robert D. Hershey Jr., a longtime reporter who wrote about finance and economics for The Times, died in January. Alex Traub contributed reporting.

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