Nika's Reviews > Thinking, Fast and Slow

I came across Thinking, Fast and Slow when I was reading about Richard Thaler’s work and his contribution to behavioural economics. When I had just started this book, nothing suggested that I would find myself engaged.

Daniel Kahneman gives a description of our behavioural patterns and the reasons behind the decisions we, human beings, make. Do we always behave in a rational way? What is the difference between “Econs” and “Humans”?
Complex theories and concepts are explained in relatively simple language and accompanied by many examples. There is no need for any special knowledge to absorb this work of non-fiction and enjoy the process of reading, although it contains a lot of statistics.

The main characters of the book, according to the author, are two modes of reasoning - System 1 and System 2 - the two systems of our brain. The latter is very slow and prone to analytical reasoning, whereas the former is much faster and intuitive.
System 1 often replaces a difficult or an ambiguous question with a simpler one and promptly answers this ‘new’ simplified question. Decisions that System 1 tends to take are often based on intuition. Such an approach may prove itself viable, for example, when it comes to chess grandmasters with vast experience. However, often we should not rely on this mode of reasoning, especially when making important decisions, such as choosing an insurance or retirement plan.
System 2, ready to thoroughly analyse facts and compare different options, is at our disposal to help make choices that are going to have a substantial impact on our lives.
The tricky part is that to be able to switch between the two systems humans have at least to make an effort to distinguish between them. The best option seems to let these two modes cooperate, but it is not as easy as one might think.

What about rationality? For decades, the leading economists have been telling us about the idea of maximising profits as the key principle propelling people to take an action. Kahneman tests this statement and shows that humans are often irrational in their decisions and actions, not striving to benefit themselves most but driven by their emotions and preconceptions. Moreover, sometimes random factors turn out to be crucial and determine our behaviour. Ordinary people, unlike ‘fictional’ economic agents, are not rational, events do not always have a causal connection, and stories of our lives often lack coherence and formal logic.

Our brain is inclined to produce cognitive illusions that come on the scene on different occasions. The effect of framing is one of the prominent examples of such cognitive traps. It results in people changing their decision or their answer if the offer that has been made to them or question they have been asked is simply reworded. In other words, another formulation of exactly the same thesis can lead to opposite results. This is how our brain works whether we like it or not.

In conclusion, this is one of those books capable of helping us understand ourselves slightly better.