The Theories of Daniel Kahneman

Daniel Kahneman and some of His Best Work

Daniel Kahneman is an Israeli American Psychologist, who won the 2002 Nobel Memorial Prize in Economic Sciences for his work in behavioural economics. He wrote the 2011 bestseller ‘Thinking, Fast and Slow,’ which in 2012 became the winner of the National Academy of Sciences Best Book Award. It is likely that Kahneman’s theories will influence cognitive studies for decades, if not centuries. Here are a selected few of those theories.

Are you a Fast or Slow Thinker?

Kahneman has divided thinking into two systems:

  • System 1 is our fast, almost intuitive thinking that also relies on memory. For example, if we are asked, “What is 2 x 5?” we can answer, “10,” within the blink of an eye. If we are asked how a person is feeling, we can judge, based on their facial expression, how we think they are feeling. We could, however, be wrong in both instances if we learnt the times table incorrectly or if the person’s facial expression doesn’t match their stated mood. So, fast thinking could cause us to make mistakes.
  • System 2 is slower, more effortful thinking, with deliberation, and it is this kind of thinking that can help us avoid making mistakes in decision-making. Kahneman has pointed out that whether we use fast of slow thinking depends on our skills – someone who has thousands of hours of practice in a skill will be able to make that “blink” decision. Someone less skilled will have to stop and think.

Fast thinking is cognitively relatively easy – we rely on memory and impulses. Slow thinking, however, involves some strain as we carefully consider all options and possibilities. Kahneman states that relying on the idea of your “gut” decision being right 90% of the time is, in fact, a fallacy.


Human Irrationality

Kahneman has also shined a light on human irrationality within his experiments, which have been carefully constructed to reveal an underlying cognitive bias. One of the most well-known examples is the two lines of equal length (also known as the Muller-Lyer optical illusion), but because one line has the v shape pointing outwards from the ends of the line it looks longer than the one with the v shape pointing inwards. We make unconscious errors of reasoning on a daily basis and if we heed his studies it equips us in a situation to avoid these kinds of errors.

Prospect Theory

Together with Amos Tversky, Kahneman worked on ‘Prospect Theory.’ This theory indicates how we fail to take certain factors into consideration in a rational way (although we think we are being rational). For example, we end up overestimating benefits and underestimating costs in what is called the ‘planning fallacy.’ Anyone who has ever remodeled a bathroom, or planned a big event will know the truth of this scenario.

Kahneman also distinguishes between the ‘remembering self’ and the ‘experiencing self.’ The experiencing self lives in the present while the remembering self keeps score and maintains the story of our life. How we remember an experience will affect our perception of that experience. In one experiment, where two people were given a colonoscopy, one patient experienced a peak of pain while the other patient’s pain rose more slowly to the same intensity and then tailed off. The person who experienced the sharp spike of pain remembered it as more painful than the one who had been let down gradually.

How we remember time is also affected by what happens during that time. Kahneman found that people remembered the pleasure of a two-week vacation with the same amount of pleasure as a one-week vacation if there were no new experiences in the second week. There is a common saying that a restaurant is as good as your last meal there – we remember what happened last and if it was unpleasant it can extinguish those earlier pleasant memories.

Hedonic Psychology

Kahneman has also explored hedonic psychology, which is related to how we perceive happiness. It is here that time again becomes a factor when remembering experiences. An example Kahneman uses is that French mothers spend less time with their children than American mothers but enjoy the time with their children more. He also examines how we have different perceptions of happiness and how leader’s intent on lowering the misery index of their people need to look at what it takes for various groups within their country’s populace to experience “happiness.” A citizen of Bhutan, whose country is reportedly the one with the highest happiness quotient, may require less than the average American to be “happy.”

To finish this brief look into Kahneman’s work, this renowned Psychology raises something of an existential question: If we are our remembering selves then who is our experiencing self?  After all, the moment we experience something, within a second it is gone and we are left with only the memory – so our experiencing self is actually a stranger and we are the sum of our memories. Or are we?

Categories: Behavioural Economics, Psychology

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1 reply


  1. Is Decision Making Rational? ⋆ The Newest Factor

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