Daniel Kahneman

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  • Topic: Prospect theory, Daniel Kahneman, Nobel Prize
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4/30/13
FIN6997A
Lidiya Abadzhieva
Term Paper

Daniel Kahneman – Nobel Prize Award in Economic Sciences 2002

Introduction
I decided to present Daniel Kahneman, who received the Nobel Prize Award in Economic Sciences in 2002, because I was impressed by his work concentrated on human irrationality. What seemed appealing about his achievements is that he developed a theory to better understand people’s decisions and choices in various situations. I wanted to see how this theory could be applied in reality and hoped to possibly use it as a tool to make better decisions as a manger, real estate agent but most of all parent and a person. I thought it would be interesting to observe how he develops the idea of human irrationality without making it sound offending and also connect it to Economics. His work seems quite impressive and his experiments show results that sometimes are quite surprising. Kahneman examines with elegance and scientific support human irrationality, he puts a different perspective on intuition judgment and choice. His field of work can be defined as economic psychology and experimental economics. This paper will give a quick overview of his career and the main concepts he developed and discovered, and how it contributes to society.

Quick Biography
Daniel Kahneman was born in Tel Aviv in 1934. His parents were Lithuanian Jews and lived in Paris, when the Germans invaded France. He contributes his interest in people to his experience during the fascist movement. Kahneman philosophical mind started developing during the childhood years. He got this degree in the Hebrew University of Jerusalem, majoring in Psychology and minor in Math, he always seemed drawn to questions that evolved around human rationality. During Kahneman’s military years he was part of the Psychology Department of the Israel Defense Forces where he recognized the idea of cognitive illusion. He developed an interviewing system that could determine if a soldier is fit for a specific duty. That planted the seeds of the paper on psychology of intuitive prediction that Kahneman later works on with Amos Tversky. Kahneman finished a PHD in psychology at the University of California, Berkley in 1961, during his graduate school years he explored the philosophy of science. Kahneman started his work with Tversky in 1969, they seemed to be a great team and enjoy each other’s collaboration. The award for Nobel Prize was received based on their intense collaborative work. However Tversky passed away before the nomination. THorughout his life Kahnment was working on various papers, experiments and articles as a psychology professor at Hebrew University from 1961 to 1978, at the University of British Columbia from 1978 to 1986, at the University of California at Berkeley from 1986 to 1994, and has been a professor at Princeton University since 1993. (Wikipedia)

Publications
Daniel Kahneman published numerous papers and articles during his career, however below are reflected only a few of his most important works. Kahneman most influential work is the book “Thinking Fast and Slow”, an international best seller that won the National Academy of Sciences Best Book Award in 2012, It was selected as one of the best books of 2011 by the New York Times Book Review, by the Economist and Wall Street Journal. In this book Kahneman presents the human mind as a combination of two systems: System 1 is fast, intuitive, and emotional; System 2 is slower, more deliberative, and more logical. Those two systems shape a person’s judgments and decisions. Those two systems or two minds can be also described as the experiencing and remembering selves. The experiencing self is the here-and-now, in the moment feeling self, whereas the remembering self is the narrating, recollecting, reflective self that makes judgments and decisions about things. The experiencing self and the remembering self evaluate situations differently. The interaction of those two systems...
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