Writing Homework Help
UCI Kahneman Won the Nobel Prize for Economics in 2002 Discussion
Help me study for my Psychology class. I’m stuck and don’t understand.
By taking the time to ask people what decisions they would make and carefully phrasing their questions in interesting ways, Kahneman and Tversky revolutionized the study of decision making, showing that people evaluate the psychological prospects of the choices, rather than the objective expected values. Put another way, expected utility theory predicts what individuals would do if they were entirely rational; Tversky and Kahneman’s prospect theory research revealed what most people actually do.
For his work on decision making, Kahneman won the Nobel Prize for Economics in 2002; Tversky would have shared the prize had he not passed away in 1996.
As you saw and read as you worked through the examples, Tversky and Kahneman revealed some of the specific ways in which psychological prospects can substantially differ from expected values. Here is a review:
- The principle of framing states that the way a choice is worded can substantially change its psychological prospects. One of the most powerful framing effects involves whether a choice is framed in terms of gains or losses. For example, people prefer lotteries, which frame the prospect in terms of potential gains, to straight-up bets which frame the prospect in terms of how much one might lose.
- Context can have profound effects on people’s judgments when making estimates, as when anchoring causes one judgment to be affected by the results of a previous estimate, even though both judgments were intended to have been made independently.
- When making decisions under conditions of uncertainty, we automatically apply heuristics (aka “rules of thumb” or mental shortcuts) to try to reduce the uncertainty. For example, the representativeness heuristic directs us to choose the most plausible conclusion when we are unsure of which conclusion is most probable, and the availability heuristic tells us to replace a question we cannot realistically answer with a similar question whose answer is more readily available. Like other heuristics, representativeness and availability usually provide us with a “better than nothing” answer, but sometimes the pull of a heuristic is so strong that we ignore more definitive information that really should form the foundation of our judgment.
Why might people sometimes have difficulty reasoning scientifically? Do you think that if people had more advanced training in areas such as statistics, economics, and psychology, they would make decisions that are more economically rewarding?
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