Download Book notesThinking Fast and Slow

Thinking Fast and Slow notes
Thinking Fast and Slow
Daniel Kahneman
Notes compiled by Jane L. Sigford
Introduction:
 Although we believe we know how the mind works, the discussions of the
book talks about the biases of intuition. P. 3
 The book discusses the current understanding of judgment and decisionmaking. The way people think, the “availability heuristic helps explain why
some issues are highly salient in the public’s mind while others are neglected
p. 8[This is particularly important as we watch the interplay of politics and
public policy surrounding education. HOW the message is given, WHAT the
message is, the TIMING of the information all contribute to what message
is perceived as true. How the message about public education is displayed is
particularly important as a strategic device for us as public educators note
mine.]
Part 1
Two Systems
The Characters if the Story
 Psychologists have named two systems: System 1 and System 2.
o System1—operates automatically and quickly with little or no effort
o System 2—allocates attention to effortful mental activities including
complex computations. Operations of System 2 often associated with
subject experience of agency, choice and concentration.
 When we think of ourselves, we identify with System 2—the conscious,
reasoning self that has beliefs, makes choices, and decides what to think
about and what to do. P.20
 Actually System 1 is hero of book—the part the effortlessly originates
impressions and emotions, display automatic complex patterns of ideas
o Detect that one object is more distant than another
o Orient to source of sound
o Complete phrase “bread and ….” Are examples of system 1 thinking
S1 (=System 1 throughout the rest of these notes. S2 = System 2]
S1—innate skills we share with other animals, help us perceive world around
us, recognize objects.
S1—learned association such as reading and understanding nuances p. 21
Some activities are voluntary but others are involuntary such as
understanding sentences in your native language.
 System2—slower, constructs thoughts in series of steps.
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S2—highly diverse BUT they require attention and are disrupted when
attention is drawn away.
o Brace for starter gun in race
o Focus attention on clowns in circus
o Look for woman white hair
o Search memory to identify a surprising sound
o Maintain faster walking speed than is natural for you are examples
p.22
 S2—can change how S1 works to some degree by programming normally
automatic functions of attention and memory—example you can deliberately
set a faster walking pace
 S2—is what you direct to “pay attention” However, intense focusing can
make people effectively blind even to stimuli that normally attract attention
e.g. distracting a driver p. 23
 Example the “Invisible Gorilla” video where people are directed to watch how
many times a basketball is passed among players. They miss completely the
fact that a gorilla walked across the stage
Plot Synopsis
 S1 and S2 are both active when we are awake.
 S1 runs automatically, generates suggestions for S2, impressions and
intuitions turn into beliefs, and impulses turn into voluntary actions. If all
goes smoothly, S2 adopts suggestions of S1 with little or no modifications.
You generally believe your impressions and act on desires which is fine-usually
 S2 normally a low-effort mode which only a fraction of capacity is engaged.
 When S1 runs into difficulty, it calls on S2 to support more detail and
specific processing to solve problem. S2 is mobilized when question arises
for which S1 doesn’t have answer, such as 17 X 24.
 S2—credited with continuous monitoring of your own behavior—control that
keeps you polite when angry. Mobilized to increased effort when it detects
an error about to be made
 In summary, most of what you (your S2) think and do originates in your S1,
bug S2 takes over when things get difficult, and it normally has the last
word.
 Division of labor between S1 and S2 is highly efficient. Minimizes effort
and optimizes performance.
 Arrangement works well most of time because S1 is generally very good at
what it does; its models of familiar situations are accurate, its short-term
predictions are usually accurate as well, and its initial reactions to challenges
are swift and generally appropriate, p. 24
 S1 has biases, systematic errors that it is prone to make in specified
circumstances
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It sometimes answers easier questions than the one it was asked
It has little understanding of logic and statistics
S1 cannot be turned off therefore causing conflict between an automatic
reaction and an intention to control p. 26 e.g. we have experience of trying
not to stare at oddly dressed couple. We try to force attention to a book;
we struggle to NOT tell someone to go to hell.
Illusions:
 The illusion we know of 2 lines, one with lines extending and one with the
lines coming in to form arrows. Our S1 says that the diagram that looks like
an arrow is shorter when in actuality the lines are the same length. This is
because S1 operates automatically and cannot be turned off at will.
 Therefore we have errors of intuitive thought which are difficult to
prevent.
 Biases cannot always be avoided because S2 may have no clue to the error.
{What are the ramifications of this when we as public educators have been
dealing with the information, the bias, from things like A Nation at Risk for
40 years???] Note mine
 The best we can do is a compromise to learn to recognize situations in which
mistakes are likely and try harder to avoid significant mistakes when the
stakes are high. P. 28
Caution:
 S1 and S2 are fictions—they are not systems in the standard sense of
entities with interacting aspects or parts. [Much like the old conversation
of right brain and left brain thinking. Those are not distinct entities. They
are interactive, complicated sophisticated definitions that try to help us
understand how the brain. ] Note mine
 The purpose is that thinking about thinking is useful because it helps us
understand.
 It’s easier to say S1 than “automatic system.” S2 is easier to say than
“effortful system. “p. 29
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Chapter 2: Attention and Effort
Many people when engaged in mental sprint, may become effectively blind as
in the video The Invisible Gorilla mentioned above.
The pupils of the eye are an indicator of the current rate at which mental
energy is used.
Your use of attention has limited capacity but respond differently to
threatened overload. The “breaker” trips when demand is excessive. P. 34
Response to mental overload is selective and precise: S2 protects the most
important activity, so it receives the attention it needs; “spare capacity” is
allocated second by second to other tasks. P34
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Allocation of attention has long evolutionary history. Orienting and
responding quickly too gravest threats improved chances of survival.
 As you become skilled in a task, its demand for energy diminishes. Studies
of the brain have shown that the pattern of activity associated with an
action changes as skill increases, with fewer brain regions involved.
 Talent has similar effects.
 Highly intelligent individual need less effort to solve the same problems as
indicated by both pupil size and brain activity.
 General “law of least effort” applies to cognitive and physical exertion—if
there are several ways of achieving he same goal, people will eventually
gravitate to least demanding course of action. In economy of action, effort
is a cost and the acquisition of skill is driven by the balance of benefits and
costs. Laziness is built deep into our nature. P. 35
 Effort is required to maintain simultaneously in memory several ideas that
require separate action
 S2 –only one who can follow rules, compare objects on several attributes,
and make deliberate choices between topics.
 The automatic S1 does not have these capabilities
 S1—detects simple relations—“They are all alike.” “The son is taller than the
father.” And excels at integrating information about one thing, but it does
not deal with multiple distinct topics at once, nor is it adept at using purely
statistical information
 S2—can program memory to obey an instruction that overrides habitual
responses. Such as counting all the fs on the page.
 Ability to control attention is not simply a measure of intelligence (even
though modern tests of working memory are included on tests of
intelligence) p. 37
 Time pressure is another driver of effort. Any task that requires you to
keep several ideas in mind at same time has a hurried time pressure. You
may be forced to work uncomfortably hard.
 We normally avoid mental overload by dividing tasks into multiple easy steps,
committing intermediate results to long-term memory or to paper rather
than overworking memory. P. 37
Chapter3: The Lazy Controller
 S2—has natural speed—monitoring environment inside your head demands
little effort. But extremes cause pressure and change the experience. If
forced to speed beyond natural rhythm, causes deliberate thought.
 Frequent switching of tasks and speeded-up mental work are not intrinsically
pleasurable, and that people avoid them when possible. This is how the law
of least effort comes to be a law.
Busy and Depleted System 2
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People who are cognitively busy are also more likely to make selfish choices,
use sexist language, and make superficial judgments in social situations.
 Memorizing and repeating digits loosens the hold of S2 on behavior but of
course cognitive load is not the only cause of weakened self-control. So
does a few drinks or sleeplessness. The self-control of morning people is
impaired at night; the reverse is true of night people
 Self-control requires attention and effort—controlling thoughts and
behaviors is one of the tasks S2 performs.
 List of situations and tasks that are known to deplete self-control (list is
long and varied. All involve conflict and the need to suppress a natural
tendency, including:
o Avoiding the thought of white bears
o Inhibiting the emotional response to a stirring film
o Making a series of choices that involve conflict
o Trying to impress others
o Responding kindly to a partner’s bad behavior
o Interacting with a person of a different race (for prejudiced
individuals p 42
 List of indications of depletion is also highly diverse
o Deviating from one’s diet
o Overspending on impulsive purchases
o Reacting aggressively to provocation
o Persisting less time in a handgrip task
o Performing poorly in cognitive tasks and logical decision making
 Activities that impose high demands on S2 require self-control, and that is
depleting and unpleasant. P. 43
 Ego depletion is at least in part a loss of motivation. After exerting elfcontrol in one task, you do not feel like making an effort in another, although
you could if you had to.
 Ego depletion is not same mental state as cognitive busyness.
 Mental energy is more than metaphor—nervous system consumes more
glucose than most other parts of body and effortful mental activity appears
to be especially expensive in currency of glucose.
 When you are engaged in such an activity, your blood glucose level drops
which affects decision-making capabilities.
Lazy System 2
 One of main functions of S2—monitor and control thoughts and actions
“suggested by S1, allowing some to expressed directly in behavior and
suppressing or modifying others.
 Recurrent theme of this book—many people are overconfident, prone to
place too much faith in their intuitions, find cognitive effort at least mildly
unpleasant and avoid it as much as possible. P. 45. [What does this say about
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how we make policy decisions about education and other important topics in
the current political climate?] Note mine
 When people believe a conclusion is true, they are also very likely to believe
arguments that appear to support it, even when these arguments are
unsound. If S1 is involved, the conclusion comes first and the arguments
follow. P. 45 [A good discussion here would be the political discussion from
Nation at Risk through NCLB. We know that NCLB is bad policy yet we
continue to allow it to be the law of the land.] Note mine.
 Intelligence is not only the ability to reason; it is also the ability to find
relevant material in memory and to deploy attention when needed. Memory
function is an attribute of S1. Everyone can slow down and check intuitive
answers. But the extent of deliberate checking and search is a
characteristic of S2, which varies among individuals. p. 46
 Those who avoid the sin of intellectual sloth could be called “engaged.” They
are more alert, more intellectually active, less willing to be satisfied with
superficially attractive answers, more skeptical about their intuitions. P. 47
Intelligence, Control, Rationality
 What is relationship between self-control and intelligence? In famous study
by Walter Mischel who studied 4 year old children who had a choice between
a small reward (one Oreo) at any time or a larger reward (two cookies) if
they waited 15 minutes. Conclusion: children who had more self-control as 4
year olds had substantially higher scores on tests of intelligence.
 Other research shows specific genes involved in control of attention, which
is affected by parenting techniques. Demonstrates close connection
between children’s ability to control their attention and their ability to
control their emotions. [NB: this is an important fact for educators, but no
surprise] note mine p. 46
 S1-impulsive and intuitive; s2 capable of reasoning and it is cautious but in
some people is lazy. Some people are more like S1; others more like S2.
Some theorist, Keith Stanovich and Richard West call them Type 1 and Type
2 personalities.
 Rationality should be distinguished from intelligence.
 Propose that lazy thinking a flaw of the reflective mind, a failure of
rationality and is a better indicator of susceptibility to cognitive errors than
are conventional measures of intelligence. i.e. IQ tests. Time will tell
whether the distinction between intelligence and rationality can lead to new
discoveries. P.49
Chapter 4: The Associative Machine
 Bananas vomit. Your reaction to those two words is a product of your
experiences, your putting things in context and is an operation of S1. How
you make meaning of those words is based on coherence—how things are
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connected and how ideas strengthen one another. P. 51 S1 made as much
meaning as possible from those 2 words automatically and quickly.
 Priming allows for one to focus possible association. For example, if you
recently heard or saw the word SO_P as SOUP, rather than SOAP.
 Priming effects—many forms. If EAT is on your mind, you will be quicker to
recognize SOUP when spoken and are primed for multitude of other foodrelated ideas.
 Primed ideas have some ability to prime other ideas, although more weakly.
 Priming not restricted to concepts and words—emotions too can be primed.
P. 53 For example, if you are primed to think of old age, you would tend to
act old, and acting old would reinforce the thought of old age.
 There are reciprocal links in priming. For example, being amused makes you
smile and smiling tends to make you feel amused. If you hold a pencil
between your teeth and force a smile, you are more likely to be amused at
pictures, other emotions, etc.
 People who nod up and down are more likely to rate an idea as positive, even
though the gesture may be unrelated to the information.
Primes that Guide us
 We think of ourselves as thinkers. However, unconscious things prime us
more than we are aware. For example, voters are more likely to vote for a
school referendum if the polling place is located inside a school.
 If people are reminded of money, they are more likely to persevere on a
problem before asking for help, they demonstrate more self-reliance, are
more selfish, less willing to spend time helping another student who
pretended to be confused about an experimental task.
 General theme of these findings is that the idea of money primes individuals;
a reluctance to be involved with others, to depend on others, or to accept
demands from others. P. 55
 In dictatorial societies where pictures of the leaders are ubiquitous, people
are primed to believe that they are constantly being watched and leads to a
reduction in spontaneous thought.
 Reminding people of their mortality increases appeal of authoritarian ideas
which may become reassuring in context of terror of death.
 Feeling that one’s soul is stained appears to trigger a desire to cleanse one’s
body, an impulse that has been called “Lady Macbeth effect.”
 Cleansing highly specific to body parts involved in a sin.
Chapter 5—Cognitive Ease
 Cognitive ease—when there are no threats, no need to redirect attention.
Usually in a good mod, like what you see, believe what you hear, trust your
intuitions, and feel situation is familiar.
 Opposite is cognitive strain-affected by level of effort and presence of
unmet demands. –likely to be vigilant suspicious, invest more effort in what
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you are doing, feel less comfortable, and make fewer errors but also less
intuitive and less creative
 Illusion—more than visual. Memory susceptible to illusion. E.G. if presented
with list of names, and a few days later given a longer list, including those on
the first list, one is likely to think those on the first list are well-known.
You have a sense of familiarity which indicates a direct reflection of prior
experience. This quality of pastness is an illusion.
 Words you have seen before becomes easier to see again—you can identify
them better than other words when they are shown very briefly and will
read them quicker. P. 61
 If something occurs during cognitive ease, it makes it easier for the
associative machine to run smoothly and will also bias beliefs. A reliable way
to make people believe in falsehoods is frequent repetition, because
familiarity is not easily distinguished from truth.
 Authoritarian institutions and marketers have always known this fact.
 Familiarity of one phrase in a statement suffices to make the whole
statement feel familiar, and therefore true. [Swift Boat episode of the
Kerry/Bush election] note mine
How to Write a Persuasive Message
 If message printed, use high quality paper, maximize contrast between
characters and their background, if in color use bright blue or red, not
middling shades of green, yellow, or pale blue. Do not use complex language
if simple language will do. Make message simple, memorable, put in verse if
you can
 If you cite a source, choose one with a name that is easy to pronounce.
 If a message is strongly linked by logic or association o other beliefs or
preferences you hold, or comes from a source you trust and like, you will feel
a sense of cognitive ease and more likely to believe the message
Strain and Effort
 If under cognitive strain, S2 more likely to kick in which means decisions are
more likely to be made on intuition, not logic.
 If under cognitive ease, it is associated with good feelings. E.g. easily
pronounced words evoke a favorable attitude
 Companies with pronounceable names do better than others for the first
week after the stock is issued, though the effect disappears over time.
 Investors believe that stocks with fluent names like Emmi, Swissfirst, will
earn higher returns than those with clunky labels like Geberit and Ypsomed
 Petition induces cognitive ease and a comforting feeling of familiarity called
the mere exposure effect.
 Studies show that words presented more frequently were rated much more
favorably than the words that had been shown only once or twice. Length of
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exposure not an issue. Can be so fast that reader is unconscious of being
exposed. [ramifications for PR? Politics? ] Note mine
 S1 can respond to impressions of events of which S2 is unaware. The mere
exposure effect is actually stronger for stimuli that the individual never
consciously sees.
Ease, Mood, and Intuition—
 If people are in a good mood, the “intuition index” is more accurate.
Unhappy subjects were completely incapable of performing intuitive tasks
accurately
 Good mood, intuition, creativity, gullibility, and increased reliance on S1 form
a cluster.
 As an opposite, sadness, vigilance, suspicion, an analytic approach, and
increased effort also go together
 Happy mood loosens the control of S2 over performance when in a good
mood, people become more intuitive and more creative but also less vigilant
and more prone to logical errors.
Chapter 6-Norms, surprise, and causes
 Capacity for surprise—essential aspect of our mental life and surprise itself
is most sensitive indication of how we understand our world and what we
expect from it. P. 71 we are able to detect a surprise, or abnormality, very
rapidly and subtlety.
 Surprise comes when something violates what we expect as a norm. Like we
share a norm of what a table is. S1 understand language and has access to
norms of categories which specify the range of plausible values as well as
the most typical cases
Chapter 7—Machine for Jumping to Conclusions
 Jumping to conclusions is efficient if conclusions are likely to be correct and
costs of an occasional mistake acceptable, and if jump saves much time and
effort.
 Jumping to conclusions is risky when situation is unfamiliar, stakes are high,
and there is not time to collect more information. Then intuitive errors are
probably which may be prevented by intervention of S2.
 Conscious doubt is not repertoire of S1—it requires maintaining incompatible
interpretations in mind at same time which demands mental effort.
 Uncertainty and doubt are domain of S2.
Bias to Believe and Confirm:
 Daniel Gilbert proposes that understanding a statement must begin with an
attempt to believe it; you must first know what idea would mean if it were
true. Only then can you decide whether or not to unbelieve it. P. 80
 If S2 is otherwise engaged, we will believe almost anything. S1 is gullible
and biased to believe, S2 is in charge of doubting and unbelieving but S2 is
sometimes busy, and often lazy
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There is evidence that people are more likely to be influenced by empty
persuasive messages such as commercials, when they are tired and depleted.
P. 81.
 Contrary to rules of philosophers of science, people quite often seek data
that are likely to be compatible with beliefs they currently hold, not trying
to refute hypotheses.
Exaggerated Emotional coherence (Halo Effect)
 If you like the president, you probably like his voice and appearance. The
tendency to like (or dislike) everything about a person—called halo effect.
 Halo effect—one of ways representation of world that S1 generates is
simpler and more coherent than the real thing.
 Sequence in which we observe characteristics of a person often determined
by chance but sequence matters—the halo effect increases the weight of
first impressions, sometimes to the point that subsequent information is
mostly wasted.
 Halo effect—reduced if one uses multiple sources of evidence particularly if
they are independent of one another and eliminate redundancy
 Principle of independent judgments has immediate application for the
conduct of meetings—all members of a meeting should be asked to write a
summary of their position on an issue and then weigh each opinion, not just
the first person to speak up which often biases the discussion.
What you see is all there is (Wysiati)
 S1—radically insensitive to both quality and quantity of information that
gives rise to impressions and intuitions. P.86
 WYSIATI—explains why we think fast and are able to make sense of partial
information in complex world. Much of time the coherent story we put
together is close enough to reality to support reasonable action.
 Biases: Overconfidence—Neither the quality nor quantity account for the
confidence in the story one can tell about what they see, even if they see
little We often fail to allow for possibility that evidence that should be
critical to our judgment is missing. Plus our associative system tends to
settle on a coherent pattern of activation and suppresses doubt and
ambiguity.
o Framing effects—different ways of presenting same information
often evoke different emotions. E. G. saying something is 90% fat
free rather than having 10% fat.
o Base-rate neglect—describing a meek person as a librarian, ignoring
the fact that there are more male farmers than librarians did not
occur.
Chapter 8: How Judgments Happen
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One makes basic assessments—S1 monitors what is going on in surrounding
and inside mind and makes assessments. S2—receives and generates
questions and directs attention
Basic assessments;
 S1—include computations of similarity and representativeness, attributions
of causality, and evaluations of the availability of associations and
exemplars.
Intensity Matching
 S1—matches information across diverse dimensions. E.g. matches age
someone started reading with I.Q. as an adult. We have a tendency to make
assumptions rightly or wrongly based on small items of information.
The Mental Shotgun
 S1—always carrying out computations such as what you see, where it is, size
of objects etc. You can carry out more deliberately if you wish, like counting
the c’s on this page. We compute much more than we want or need—calls
this excess computation mental shotgun.
 It is impossible to aim at a single point with a shotgun because of the
scatter and it is equally difficult for S1 not to do more than S2 charges it to
do. p. 96
Chapter 9: Answering an Easier Question
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We are rarely stumped—Have intuitive ideas and feelings about almost
everything.
 Sometimes we have a target question that is the assessment you intend to
produce. The heuristic question is the simpler question that you answer
instead. We often find adequate though often imperfect answers to
difficult questions—called substitution.
 Example: Target Question—Ho happy are you with you life these days?
o Heuristic Question—What is my mood right now?
 Mental shotgun makes it easy to generate quick answers to difficult
questions without imposing much hard work on your lazy S2.
 Sometimes we even find more than one possible simpler answer to the target
question.
Mood Heuristic for Happiness
 How happy are you these das?
o How many dates did you have last month?
 If you reverse the order of the questions, because of association
respondents like # of dates with happiness and the answers are different
than if the order is like the first pair.
Affect Heuristic
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Psychologist Paul Slovic—affect heuristic where people let their likes and
dislikes determine their beliefs about the world. Your political preference
determines the arguments that you find compelling.
 Entire list of characteristics of S1 on pp. 104-5
Part2 Heuristics and Biases
Chapter 10 The Law of Small Numbers
 S1—tries to take statistics and make causalities of them.
 A random event y definition does not lend itself to explanation, but
collections of random events do behave in a highly regular fashion. E
 Extreme results happen more often in small samples but one cannot
interpret the results as causal [We do too often with data about student
performance.] note mine
 Even sophisticated researchers have poor intuitions and a wobbly
understanding of sampling effects. P. 111
Law of Small Numbers
 For a research psychologist sampling variation is not a curiosity; it is a
nuisance and a costly obstacle, which turns the undertaking of every
research project into a gamble. P. 112
 Researchers who pick too small a sample leave themselves at the mercy of
sampling luck. Risk of error can be estimated using a sample procedure but
psychologists do not use calculations to decide on sample size. They use
their judgment, which is commonly flawed.
 One researcher pointed out that psychologists commonly chose samples so
small that they exposed themselves to a 50% risk of failing to confirm their
true hypotheses! P. 112.
 Kahneman had experienced choosing sample so small that results often made
no sense. Why? The odd results were actually artifacts of my research
method.!!! He had trusted tradition and intuition in selection of size.
 Kahneman actually developed questionnaire that described realistic research
situations and asked famous researchers to talk about how they chose
sample size. Discovered that a large majority of respondents had paid
insufficient attention to sample size. [implication for us in using research??]
Bias of Confidence over doubt
 When confronted with messages such as “In a telephone poll of 300 seniors,
60% support the president” S1 not prone to doubt—suppresses ambiguity
and spontaneously constructs stories that are as coherent as possible.
 Unless message is immediately negated, the associations that it evokes will
spread as if the message were true. We have tendency to believe rather
than doubt, which is more work p. 114
 We are also prone to exaggerate the consistency and coherence of what we
see—contributes to halo effect. It will produce a representation of reality
that makes too much sense.
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Cause and Chance
 Associative machinery seeks causes
 Our predilection for causal thinking exposes us to serious mistakes in
evaluating the randomness of truly random events. P. 115
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Random processes produce many sequences that convince people that the
process in not random after all. P. 115
 The idea of a “hot hand” in basketball for example. There is no such thing as
a hot hand in professional basketball, either in shooting from the field or
scoring from the foul line. Of course, some players are more accurate than
others, but the sequence of successes and missed shots satisfies all tests of
randomness. The hot hand is entirely in the eye of the beholders, who are
consistently too quick to perceive order and causality in randomness. The
hot hand is a massive and widespread cognitive illusion. P. 116.
 If you follow your intuition, you will more often than not err by
misclassifying a random event as systematic. We are far too willing to
reject the belief that much of what we see in life is random. P. 117
 The research and money into small schools by Gates Foundation is an
example. We constructed causal story that small schools made a difference.
However the causal analysis was wrong because the facts were wrong. If the
statisticians who reported to the Gates Foundation had asked about the
characteristics of the worse schools, they would have found that bad
schools also tend to be smaller than average. The truth is that small schools
are not better on average; they are simply more variable. If anything, say
Wainer and Zerling, large schools tend to produce better results, especially
in higher grades where a variety of curricular options is valuable. P. 118
 We pay more attention to content of messages than to information about
their reliability and as a result end up with view of the world that is simpler
and more coherent than data justify.
 Statistics produce many observations that appear to beg for causal
explanations but do not lend themselves to such explanations. Many facts
are due to chance including accidents of sample. Causal explanations of
chance evens are inevitably wrong. P. 119.
Chapter 11:Anchors
 Anchoring effect= when people consider a particular value for an unknown
quantity before estimating that quantity. What happens is one of the most
reliable and robust results of experimental psych: the estimates stay close
to the number people considered—hence the image of an anchor.
 2 types of anchoring: adjustment and priming
 Anchors are threatening in that you are always aware of the anchor and even
pay attention to it, but you do not know how it guides and constrains
thinking. E.g in negotiations. An outrageous offer is the anchor around which
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people revolve unless someone understands the principle of anchoring and
provides counter effects.
Chapter 12: Science of Availability
 Availability heuristic—when people are asked to retrieve instances from
memory and it is easy and fluent to do so, the category will be judged to be
large. If you can retrieve information easily about how movie stars have
been in trouble with the law, you will form a bias about the size of the group
of movie stars who have been in trouble.
 People who let themselves be guided by S1 are more strongly susceptible to
availability bias than others who have S2 more engaged and are exhibiting a
higher vigilance to facts. P. 135.
Chapter 13-Availability, Emotion, and Risk
 Availability effects help explain pattern of insurance purchase and
protective action after disasters. The dynamics of memory fade with time
and insurance purchases decline.
Availability and Effect
 Estimate of cause of death are warped by media coverage. The coverage is
itself biased toward novelty and poignancy. Unusual events (such as
botulism) attract disproportionate attention and are consequently perceived
as less unusual than they really are.
 Our expectations about the frequency of events are distorted by the
prevalence and emotional intensity of the messages to which we are exposed.
 The ease with which ideas of various risks come to mind and the emotional
reactions to these risks are inextricably linked. Frightening thoughts and
images occur to us with particular ease, and thoughts of danger that are
fluent and vivid exacerbate fear. P. 138
 People perceive good technologies as having high benefit and low risk. If
however there are low risk and low benefit, people will rate technology
higher because “emotional tail wags the rational dog.”
 Paul Slovic—Mr. and Ms. Citizen says they are guided by emotions rather
than by reason, easily swayed by trivial details, and inadequately sensitive to
differences between low and negligibly low probabilities. P. 140
 Experts show many of the same biases in attenuated form but often their
judgments and preferences about risks diverge from those of other people.
 Experts often measure risks by the number of life or (life years) lost while
public draw finer distinctions, between “good deaths” and “bad deaths”.
These distinctions often ignored in statistics that merely count cases.
Slovic argues that public has richer conception of risks than do experts.
Consequently he strongly resists the view that experts should rule and that
their opinions should be accepted without question when they conflict with
opinions and wishes of other citizens
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However, Ass Sunstein disagrees with Slovic and says that experts act as
bulwark against “populist excesses. P. 141.
We have basic limitation in the ability of our mind to deal with small risks:
we either ignore them altogether or give them far too much weight—nothing
in between. P. 143. Threat of terroristic attacks for example.
Chapter 14: Tom W’s Specialty
When people asked to decide probability of an event, they are likely to use
shotgun approach, evoking answer to easier questions p.150
When people make predictions based on representativeness (if a factor
represents a group/pattern—similarity to stereotypes) exclusive reliance
upon it is an error against statistical logic. Some people ignore base rates
(basic information) because of the belief that the fact is irrelevant. And
some discount the quality of the evidence. S1 automatically processes
information as though it were true. If you have doubts about quality of
evidence, let your judgments of probability stay close to the base rate. P.
153
Anchor your judgment of probability of an outcome on a plausible base rate
Question the diagnosticity of your evidence.
Chapter 15—Linda Less is More
Another case study about Linda with discussion about conjunction fallacy—
when people judge a conjunction of two events to be more probably than one
of the events in a direct comparison.
There was discussion about some theorists who dispute Kahneman’s
discussion.
Chapter 16—Causes Trump Statistics
Contributions to stereotypes—2 types—statistical base rates which are
facts about a population to which a case belongs, but they are not relevant
to the individual case. Causal base rates—change the view of how individual
case came to be.
Stereotypes—although a negative connotation—are how we think of
categories. But neglecting valid stereotypes inevitably results in suboptimal
judgments.
Nisbett and Borgida found that when they presented their [psychology]
students with a surprising statistical fact, the students managed to learn
nothing at all. But when the students were surprised by individual cases—
two nice people who had not helped others—they immediately made the
generalization and inferred that helping is more difficult than they had
thought. There is a deep gap between our thinking about statistics and our
thinking about individual cases.
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Even compelling causal statistics will not change long-held beliefs or beliefs
rooted in personal experience. [Hence the difficulty in getting rid of racism
note mine]
However surprising individual cases have a powerful impact and are a more
effective tool for teaching psychology because the incongruity must be
resolved and embedded in a causal context.
You are more likely to learn something by finding surprises in your own
behavior than by hearing surprising facts about people in general. P. 174
Chapter 17-Regression to the Mean
Regression to the mean—discovered by Francis Galton in the 19th century
Regression effects found everywhere. If there is a great performance, the
next is likely to be nearer average; if a poor performance, the next is likely
to be more average. This is called regression to the mean.
Regression effect is common source of trouble in research. Scientists often
imply causality when it is correlational. P. 183
Chapter 18—taming Intuitive Predictions
Intuitive predictions need to be corrected because they are not regressive
and therefore are biased. P. 190 Most predictions do not allow for
regression to the mean. They are usually overly optimistic.
Correcting the prediction is a task for S2—to look at quality of baseline
data, and evaluate quality of evidence. P. 192
If your predictions are unbiased, you will never have the satisfying
experience of correctly calling an extreme case.
It is natural for S1 to generate overconfident judgments because it is
determined by the coherence of the best story you can tell from the
evidence at hand. P. 194
Regression even a problem for S2—the idea of regression is alien and
difficult to communicate and comprehend. Matching predictions to evidence
is not only something we do intuitively; it also seems a reasonable thing to do.
We will not learn to understand regression from experience. P. 195
Part 3
Overconfidence
Chapter 19—Illusion of Understanding
Nassim Taleb introduced notion of narrative fallacy—stories that arise from
our continuous attempt to make sense of the world. The explanatory stories
that people find compelling are simple; concrete rather than abstract, assign
a larger role to talent, stupidity, and intentions than to luck and focus on a
few striking events that happened rather than on countless events that
failed to happen. P199 Humans constantly fool ourselves by constructing
flimsy accounts of the past and believing they are true.
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Good stories provide coherent and believable account of people’s actions and
intentions. Foster an illusion of inevitability. Seek and obtain funding to
start a company and make a series of decisions that work out well.
Paradoxically, it is easier to construct a coherent story when you know little;
when there are fewer pieces to fit into a puzzle.
Core of the illusion is that we believe we understand the past, which implies
that the future also should be knowable, but in fact we understand the past
less than we believe we do. P. 201
Humans have imperfect ability to reconstruct past states of knowledge, or
beliefs that have changed. Once you adopt a new view of the world (or of any
part of it), you immediately lose much of your ability to recall what you used
to believe before your mind changed. P. 202
Hindsight bias has pernicious effects on evaluations of decision makers.
Leads observers to assess quality of a decision not by whether the process
was sound but by whether its outcome was good or bad. P. 203
Hindsight particularly unkind to decision makers who act as agents for
others—physicians, financial advisers, CEOS, etc. We are prone to blame
decision makers—called outcome bias.
The worse the consequence, the greater the hindsight bias e.g. Sept 11.
Because decision makers who expect to have their decision scrutinized with
hindsight are drive to bureaucratic solutions—and to an extreme reluctance
to take risks.p. 204
This also brings undeserved reward to irresponsible risk seekers—those who
take crazy gambles and win. These people are believed to have “flare.”
CEOS do influence performance, but the effects are much smaller than a
reading of the business press suggests. [What does this say about the
superintendency? Question mine]
Consumers have hunger for a clear message about the determinants of
success and failure in business, and the need stories that offer a sense of
understanding, however illusory. P206
In Halo Effect by Philip Rosenzweig, he concludes that stories of success
and failure consistently exaggerate the impact of leadership style and
management practices on firm outcomes, and thus their message is rarely
useful. P. 206
Halo effect and outcome bias—explain extraordinary appeal of Jim Collins’
Good to Great and Jerry I Porras’s Built to last. Messages are the good
managerial practices can be identified and that good practices will be
rewarded by good results. Both messages are overstated. The comparison
of firms that have been more or less successful is to a significant extent a
comparison between firms that have been more or less lucky. Knowing the
importance of luck, you should be particularly suspicious when highly
consistent patterns emerge from the comparison of successful and less
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successful firms. In the presence of randomness, regular patterns can only
be mirages. P. 207
 On average gap in corporate profitability and stock returns between
outstanding firms and the less successful studied in Built to Last shrank to
almost nothing in the period following the study.
 Stories of how businesses rise and fall strike chord with readers by
offering a simple message of triumph and failure
Chapter 20—Illusion of Validity
 Illusion of Validity is a cognitive illusion—we use substitution sometimes—we
think that performance on a teamwork challenge e.g. is an example of how
someone will perform as a leader in the military when there is no correlation.
 Confidence in judgment is a feeling which reflects coherence of information
and cognitive ease in process. It is wise to take admissions of uncertainty
seriously but declarations of high confidence mainly tell you that an
individual has constructed a coherent story in his mind, not necessarily that
the story is true. P.212
Illusion of Stock-Picking Skill
 Stock market industry appears to be built largely on illusion of skill
 Study showed that, on average, the most active traders had the poorest
results, while investors who traded the least earned the highest returns.
Another paper showed that men acted on their useless ideas significantly
more often than women, and that as a result women achieved better
investment results than men.
 The evidence from more than 50 years of research is conclusive: for a large
majority of fund managers, the selection of stocks is more like rolling dice
than like playing poker. Typically at least two out of every 3 mutual funds
underperform the overall market in any given year.
 Year to year correlation between outcomes of mutual funds is very small,
barely higher than zero. The successful funds in any given year are mostly
lucky; they have a good roll of the dice. P. 215
 The subjective experience of traders is that they are making sensible
educated guesses in a situation of great uncertainty. In highly efficient
markets, however, educated guesses are no more accurate than blind
guesses. P. 216
 The illusion of skill is not only an individual aberration; it is deeply ingrained
in the culture of the industry. Facts that challenge such basic assumptions—
and thereby threaten people’s livelihood and self-esteem—are simply not
absorbed.
What Supports the Illusions of Skill and Validity
 Cognitive illusions can be more stubborn than visual illusions.
 The illusions of validity and skill are supported by a powerful professional
culture. It is not surprising that large numbers of individuals in that world
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believe themselves to be among the chosen few who can do what they believe
others cannot. P. 217
Illusions of Paradox
 Idea that future is unpredictable is undermined every day by the ease with
which the past is explained
 The illusion that we understand the past fosters overconfidence in our
ability to predict the future.
 In predicting events in the future the experts performed worse than they
would have if they had simply assigned equal probabilities to each of the
potential outcomes. Those who know more forecast very slightly better than
those who know less. But those with the most knowledge are often less
reliable. The reason is that the person who acquires more knowledge
develops an enhanced illusion of her skill and becomes unrealistically
overconfident. P. 219
It is not the Experts’ Fault—The World is Difficult
 The main point of this chapter is not that the people who attempt to predict
the future make many errors. The first lesson is that errors of prediction
are inevitable because the world is unpredictable
 The second is that high subjective confidence is not to be trusted as an
indicator of accuracy (low confidence could be more informative)
 Short-term trends can be forecast, and behavior and achievements can be
predicted with fair accuracy from previous behaviors and achievements.
 We should not expect performance in officer training and in combat to be
predictable from behavior on an obstacle field.
 You should expect little or nothing from Wall Street stock pickers who hope
to be more accurate than the market in predicting the future of prices. P.
221
Chapter 21:Intuitions vs. Formulas
 Paul Meehl’s groundbreaking research showed that simple statistical
algorithms are better predictors than experts.
 Experts are inferior to algorithms because those experts try to be clever,
think outside the box and consider complex combinations of features in
making predictions. Complexity may work in the odd case but more often
than not, it reduces validity.
 Simple combinations of features are better.
 Several studies have shown that human decision makers are inferior to a
prediction formula even when they are given the score suggested by the
formula because they feel that they can overrule the formula because they
have additional information but they are wrong more often than not.p. 224
 Another reason is that human are incorrigibly inconsistent in making
summary judgments of complex information. When asked to evaluate the
same information twice, they frequently give different answers.
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Surprising conclusion: to maximize predictive accuracy, final decisions should
be left to formulas, especially in low-validity environments such as admission
to medical school
 People often give too much weight to interviews.
 Multiple regressions—finds optimal formula for putting together weighted
combination of predictors. However, Dawes observed that the complex
statistical algorithm adds little or no value. One can do just as well be
selecting a set of scores that have some validity for predicting the outcome
and adjusting the values to make them comparable.
 Formulas that assign equal weights to all predictors are often superior,
because they are not affected by accidents of sampling.
 It is possible to develop useful algorithms without any prior statistical
research. Simple equally weighted formulas based on existing statistics or
on common sense are often very good predictors of significant outcomes.
Hostility to Algorithms
 Certain hostility to algorithms because humans don’t want to give up their
belief in expert judgments.
Learning from Meehl
 Intuition adds value but only after a disciplined collection of objective
information and disciplined scoring of separate traits.
Chapter 22—Expert Intuition: When can we trust it
 The confidence that people have in their intuitions is not a reliable guide to
their validity. In other words, do not trust anyone—including yourself—to
tell you how much you should trust their judgment
 When to trust intuitions as expertise? When 1) an environment that is
sufficiently regular to be predictable and 2) there is an opportunity to learn
these regularities through prolonged practice.
 When both these conditions are satisfied, intuitions are likely to be skilled.
Chess for example.
 It is wrong to blame anyone for failing to forecast accurately in an
unpredictable world. However, it seems fair to blame professionals for
believing they can succeed in an impossible task. Claims for correct
intuitions in an unpredictable situation are self-delusional at best, sometimes
worse. P. 24
 Expertise is not a single skill but a collection and the same expert may be
highly expert in some tasks while remaining a novice in others
 Experts may not know the limits of their expertise. Short-term anticipation
and long-term forecasting are different tasks.
 When to trust expert? When the environment is sufficiently regular and if
the judge has had a chance to learn its regularities, the associative
machinery will recognize situations and generate quick and accurate
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predictions and decisions. You can trust someone’s intuitions if these
conditions are met.
Associative memory also generates subjectively compelling intuitions that
are false. In less regular environment S1 is often able to produce quick
answers to difficult questions by substitution, creating coherence where
there is none.
Chapter 23—The Outside View
Planning Fallacy—overly optimistic forecasts of the outcome of projects are
everywhere. People have a tendency to ignore data that does not coincide
with their beliefs. The project initially has more energy and people often do
the easiest part first and don’t take into consideration life’s interruptions
that provide time delays.
Planners should make every effort to frame forecasting problem to
facilitate utilizing all the distributional information of similar projects that
is available.
Because of this unrealistic optimistic view that most people take, people
pursue initiatives that are unlikely to come in on budget or on time or to
deliver the expected returns—or even to be completed because they are
overly optimistic about the odds they face. P. 252
Chapter 24—Engine of Capitalism
Planning fallacy is only one of the manifestations of a pervasive optimistic
bias. Optimism is normal but some fortunate people are more optimistic than
the rest of us. p. 255
Optimistic individuals play a disproportionate role in shaping our lives. They
are inventors, entrepreneurs, etc. and risk takers
Optimistic people often spur organizations to take risks but they
underestimate the odds they face, and do invest sufficient effort to find
out what the odds are. They misread the risks
One of benefits of optimism is it encourages persistence in face of
obstacles.
Organizations that take the word of overconfident experts can expect
costly consequences. The study of CFOs showed that that those who were
most confident and optimistic about the S & P index were also overconfident
and optimistic about the prospects of their own firm and went on to take
more risk than others. Other professionals must deal with the fact that an
expert worthy of the name is expected to display high confidence. P. 262
Confidence is valued over uncertainty. Extreme uncertainty is paralyzing
under dangerous circumstances, and the admission that one is merely
guessing is especially unacceptable when the stakes are high.
The main benefit of optimism is resilience in the face of setbacks.
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As a team converges on a decision—and especially when the leader tips her
hand—public doubts about the wisdom of the planned move are gradually
suppressed and eventually come to be treated as evidence of flawed loyalty
to the team and its leaders.pl. 264
The suppression of doubt contributes to overconfidence in a group where
only supporters of the decision have a voice.
Part 4-Choices
Chapter 25-Bernoulli’s Errors
Prior to Bernoulli, mathematicians had assumed that gambles are assessed by
their expected value: a weighted average of the possible outcomes, where
each outcome is weighted by its probability. Most people dislike risk and if
they are offered a choice between a gamble and an amount equal to its
expected value they will pick the sure thing. In fact a risk-averse decision
maker will choose a sure thing that is less than expected value, in effect
paying a premium to avoid the uncertainty. P. 273
However, his theory is seriously flawed. Bernoulli’s theory assumes that the
utility of wealth is what makes people more or less happy. However, the
happiness that one may experience is determined by the recent change in
their wealth.
Why did the theory stay in place so long? Because people give the theory
the benefit of the doubt, trusting the community of experts who have
accepted it. Also disbelieving is hard work and S2 is easily tired. P 277
Chapter 26 Prospect Theory
3 factors in prospect theory: 1) evaluation is relative to a neutral reference
point (judged by deviation from this point), 2) principle of diminishing
sensitivity applies to both sensory dimensions and the evaluation of changes
of wealth. (Turning on a dim light in dark room more startling than turning
on same light in brightly lit room), 3) loss aversion when directly compared or
weighted against each other, losses loom larger than gains. P. 282
Chapter 27—Endowment Effect
In the past there have been errors in thinking that your value for the
current state of affairs is that only the current state, not history, matters.
However, people value money, time, etc based on their current access to
money and time. Correcting the mistake of ignoring personal history has
been one of the achievements of behavioral economics.
Endowment effect—the response to a loss is stronger than the response to a
corresponding gain.
However, for the poor their choices are between losses. Money that is
spent on one good is the loss of another good that could have been
purchased instead. For the poor, costs are losses. P. 298
Chapter 28—Bad Events
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Concept of loss aversion is certainly most significant contribution of
psychology to behavioral economics. P. 300
Brain processes angry faces quicker than happy ones—brains of human and
other animals contain a mechanism that is designed to give priority to bad
news. P. 301
Even emotionally charged words attract attention faster than do happy
words
Bad impressions and bad stereotypes are quicker to form and more resistant
to disconfirmation that good ones. P.302
Long-term success of a relationship depends far more on avoiding the
negative than on seeking the positive. Gottman estimated that a stable
relationship requires that good interactions outnumber bad interactions by
at least 5 to 1. P. 302
The desire to avoid losses shows up in negotiations and renegotiations of
contracts—the existing terms are reference points and a proposed change is
inevitably viewed as a concession that one side makes to the other. Loss
aversion creates an asymmetry that makes agreements difficult to reach.
Negotiations over a shrinking pie are especially difficult, because they
require an allocation of losses. People tend to be much more easygoing when
they bargain over an expanding pie. P. 304
In reorganization and restructuring, for the affected parties, potential
losers will be more active and determined than potential winners [school
boundary changes e.g. note mine]
Chapter 29—Fourfold Pattern
The decision weights that people assign to outcomes are not identical to the
probabilities of these outcomes, contrary to what can be expected.
Improbably outcomes are overweighted—this is the possibility effect e.g.
chances of winning the lottery p. 312
People attach values to gains and losses rather than to wealth and the
decision weights that they assign to outcomes are different from
probabilities. P. 316—called fourfold pattern
Many unfortunate human situations are were people face very bad option,
take desperate gambles, accepting a high probability of making this worse in
exchange for a small hope of avoiding a large loss. Risk taking of this kind
often turns manageable failures into disasters. This is where businesses
that are losing ground to a superior technology waste their remaining assets
in futile attempts to catch up. P. 319
Consistent overweighting of improbably outcomes—a feature of intuitive
decision making—eventually leads to inferior outcomes. P 321.
Chapter 30—Rare Events
Psychology of terrorism similar to high-prize lotteries. Highly unlikely
events are either ignored or overweighted p. 323 because of focused
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attention, confirmation bias, and cognitive ease. Part of the cause of
underweighting of rare events is because few people have actually
experienced that event, e.g. Californians experiencing earthquakes. P. 331
Chapter 31—Risk Policies
 Risk policies are broad frames to issues. An organization that could
eliminate both excessive optimism and excessive loss aversion should do so
but very difficult to do.
Chapter 32—Keeping Score
 Except for the very poor, for whom income coincides with survival, the main
motivators of money-seeking are not necessarily economic.
 We use mental accounts to keep score on money. We may put money in
several accounts and then keep tabs on it. We may put money in a savings
account and keep a credit card balance which has a higher interest rate.
 People avoid cancelling a floundering project even when one should because it
leaves a permanent stain on the executive’s record and his personal interests
are perhaps best served by gambling further in hope of recouping original
investment or at least in an attempt to postpone the day of reckoning.
[Failure to redo NCLB note mine]
 This inability to “pull the plug’ keeps people for too long in poor jobs, unhappy
marriages, and unpromising research projects. P. 346
Regret
 Fear of regret is a factor in many of the decisions that people make.
P346 Regret is one of the counterfactual emotions that are triggered by
the availability of alternatives to reality.
 Regret and blame are both evoked by a comparison to a norm but the
relevant norms are different.
 Consumers who are reminded that they may feel regret as a result of
their choices show an increased preference for conventional options,
favoring brand names over generics. P. 348
Responsibility
 Losses are weighted about twice as much as gains in several contexts: choice
between gambles, the endowment effect, and reactions to price changes.
 Dilemma between intensely loss-averse moral attitudes and efficient risk
management does not have simple and compelling solution. P 351
 You can take steps to inoculate yourself against regret—most useful is to be
explicit about anticipation of regret. If you can remember when things go
badly that you considered the possibility of regret carefully before
deciding, you are likely to experience less of it. Regret and hindsight bias
will come together so anything you can do to preclude hindsight is likely to
be helpful. P, 351
Chapter 33—Reversals
Unjust Reversals
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There is good reason to believe that the administration of justice is
infected by predictable incoherence in several domains. Context can alter
opinions drastically
 Difficult to see unless results are compared across types of cases.
Chapter 34—Frames and Reality
 In 2006 World Cup Italy played France. Italy won. France lost. The
meaning of those two sentences depends on your associative machinery and
may mean different things.
 Emotionally loaded words cause either approach (if positive) or avoidance (if
framed as a loss
 Decision makers tend to prefer the sure thing over the gamble (they are
risk averse) when the outcomes are good. They tend to reject the sure
thing and accept the gamble (they are risk seeking) when both outcomes are
negative. P 368
Good Frames
 Not all frames are equal—the frame of miles per gallon provides very poor
guidance to decisions of both individuals and policy makers. P. 371
 Organ donation another example—Some countries have opt-out, not opt-in,
policy like US. Austria is opt-out and has 100% donor rate. Denmark has
opt-in and has 4% donor rate.
Part 5—Two Selves
Chapter 35—Two Selves
 Difference between the experience and the memory of the experience.
Remembering pain is an example. The experiencing self does not have a voice.
The remembering self is sometimes wrong, but it is the one that keeps score
and governs what we learn from living, and it is the one that makes decisions.
P. 381
 What we learn from the past is to maximize the qualities of our future
memories, not necessarily of our future experience.
 We have strong preferences about the duration of our experiences of pain
and pleasure. We want pain to be brief and pleasure to last but our memory
has evolved to represent the most intense moment of an episode of pain or
pleasure (the peak) and the feelings when the episode was at its end. P. 385
Chapter 36-Life as a Story
 How long a story lasts (duration neglect) normal and the ending often
defines its character. The same is true in the rules of narratives and in the
memories of colonoscopies, vacations, and films. This is how the
remembering self works: it composes stories and keeps them for future
reference. P. 386
 What matters is how the person feels at the end of the experience
Chapter 37—Experienced Well-Being
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The experience of a moment or an episode is not easily represented by a
single happiness value p. 393
It appears that a small fraction of the population does most of the
suffering.
An individual’s mood at any moment depends on her temperament and overall
happiness, but emotional well-being also fluctuates considerably over the day
and the week. The mood of the moment depends primarily on the current
situation. At work what is important are situational factors such as
opportunity to socialize, exposure to loud noise, time pressure. Attention is
key. Our emotional state is largely determined by what we attend to, and we
are normally focused on our current activity and immediate environment. P.
394
Pleasure is increased when people switch time from passive leisure, such as
TV, to more active forms, such as socializing and exercise.
Some aspects of life have more effect on the evaluation of one’s life than on
the experience of living. Educational attainment is an example—experience
greater well-being.
The more educated tend to report higher stress.
Ill health has much stronger adverse effect on experiences= well-being than
on life evaluation.
Living with children –report stress and anger are common among parents
Religious participation has relatively greater favorable impact on both
positive affect and stress reduction than on life evaluation. However
religion provides no reduction of feelings of depression or worry. p. 396
Severe poverty amplifies experience effects of other misfortunes. Illness
worse for very poor.
Chapter 38—Thinking about life
Experienced well-being on average unaffected by marriage, not because
marriage makes no difference to happiness but because it changes some
aspects of life for the better and others for the worse.
The goals that people set for themselves are so important to what they do
and how they feel about it that an exclusive focus on experienced well-being
is not tenable.
Conclusions
What is remembered and what actually happens is important when talking
about people’s happiness. This must be considered when making policy
decisions.
People are not entirely rational or irrational. The theory that rational people
should be free to choose is part of the libertarian approach to public policy
Behavioral economists believe that freedom has a cost borne by individuals
who make bad choices and by a society that feels obligated to help them.
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Thinking Fast and Slow notes
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
js
The economists of the Chicago school, however, believe that rational agents
do not make mistakes. P. 412
There is further discussion of different economic theories and the effect
on public policy.
There is also further summary of S1 and S2, particularly discussing
judgment errors and how to avoid them.
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