Finance and economics | Free exchange

Daniel Kahneman was a master of teasing questions

How a psychologist transformed economics

Illustration of Daniel Kahneman standing on top of and underneath an impossible circle
Illustration: Álvaro Bernis

Winners of the Nobel prize in economics tend to sprinkle their papers with equations. Daniel Kahneman, who died on March 27th, populated his best-known work with characters and conundrums. Early readers encountered a schoolchild with an IQ of 150 in a city where the average was 100. Later they pondered the unfortunate Mr Tees, who arrived at the airport 30 minutes after his flight’s scheduled departure, and must have felt even worse when he discovered the plane had left 25 minutes late. In the 1970s readers had to evaluate ways to fight a disease that threatened to kill 600 people. In 1983 they were asked to guess the job of Linda, an outspoken, single 31-year-old philosophy graduate.

Kahneman used such vignettes to expose the seductive mental shortcuts that can warp people’s thoughts and decisions. Many people, for example, think it more likely that Linda is a feminist bank-teller than a bank-teller of any kind. Presented with two responses to the disease, most choose one that saves 200 people for certain, over a chancier alternative that has a one-third chance of saving everyone and a two-thirds chance of saving no one. But if the choice is reframed, the decision is often different. Choose the first option, after all, and 400 people die for sure. Choose the second and nobody dies with a one-third probability.

This article appeared in the Finance & economics section of the print edition under the headline "Nobel gossip"

China’s risky reboot

From the April 6th 2024 edition

Discover stories from this section and more in the list of contents

Explore the edition

More from Finance and economics

What campus protesters get wrong about divestment

Will withdrawing money hurt Israel?

Hedge funds make billions as India’s options market goes ballistic

The country’s retail investors are doing less well


Russia’s gas business will never recover from the war in Ukraine

Hopes of a Chinese rescue look increasingly vain