Thinking Fast and Slow - My Thoughts
During my time studying Economics, I had struggled to show passion for a particular area of the subject. This was until I was introduced to Behavioural and Experimental Economics and having studied it for a term, I was able to immerse myself into the subject matter. One of the books on the recommended reading list was ‘Thinking, Fast and Slow’ by Daniel Kahneman. The main take-away from the book is the differences between System 1 and System 2, which is a concept developed by Kahneman in the book. System 1 thinks fast, intuitive and effortless and System 2 thinks slow and logically. For weeks, this book has been glued to my hands and I am going to try and explain why.
Initially, the thought of understanding how people’s thinking can link to Economics really caught my eye. My favourite application of this is the classic problem posed by Kahneman on students which is worded as follows, “ A bat and a ball cost £1.10 in total. The bat costs £1.00 more than the ball. How much does the ball cost?”. I had previously seen this problem, so knew the answer was 5p. However, I was surprised as to how many people get tripped up by this question and their System 1 rushes to an answer of 10p. What was even more surprising to me is that I was faced with this question on two more occasions after reading the book.
The first time that I was faced with this problem was when watching “The 1% Club”, the new Quiz Show on ITV hosted by Lee Mack. The above question was asked as the 3rd last question in the show and 2/7 people got the question wrong, as well as my housemate who was watching with me. The fact that the contestants had 30 seconds to answer the question could have allowed their System 2, which is described by Kahneman as slow and logical, to take over and override the urge of System 1 to answer 10p. Seeing a real life application of this question intrigued me and made me marvel at the fact that people were thinking exactly how Kahneman had predicted.
The second time that I was faced with this problem was at the UOB Sport Club Conference, where UB Sport teachers asked a room of 70 students the bat and ball question. It baffled me again how so many people’s answers were 10p, as predicted by Kahneman, especially in a room full of university students.
Another example that Kahneman gives, which shows the differences between System 1 and 2 is through the Muller-Lyer illusion (below).During my time studying Economics, I had struggled to show passion for a particular area of the subject. This was until I was introduced to Behavioural and Experimental Economics and having studied it for a term, I was able to immerse myself into the subject matter. One of the books on the recommended reading list was ‘Thinking, Fast and Slow’ by Daniel Kahneman. The main take-away from the book is the differences between System 1 and System 2, which is a concept developed by Kahneman in the book. System 1 thinks fast, intuitive and effortless and System 2 thinks slow and logically. For weeks, this book has been glued to my hands and I am going to try and explain why.
Initially, the thought of understanding how people’s thinking can link to Economics really caught my eye. My favourite application of this is the classic problem posed by Kahneman on students which is worded as follows, “ A bat and a ball cost £1.10 in total. The bat costs £1.00 more than the ball. How much does the ball cost?”. I had previously seen this problem, so knew the answer was 5p. However, I was surprised as to how many people get tripped up by this question and their System 1 rushes to an answer of 10p. What was even more surprising to me is that I was faced with this question on two more occasions after reading the book.
The first time that I was faced with this problem was when watching “The 1% Club”, the new Quiz Show on ITV hosted by Lee Mack. The above question was asked as the 3rd last question in the show and 2/7 people got the question wrong, as well as my housemate who was watching with me. The fact that the contestants had 30 seconds to answer the question could have allowed their System 2, which is described by Kahneman as slow and logical, to take over and override the urge of System 1 to answer 10p. Seeing a real life application of this question intrigued me and made me marvel at the fact that people were thinking exactly how Kahneman had predicted.
The second time that I was faced with this problem was at the UOB Sport Club Conference, where UB Sport teachers asked a room of 70 students the bat and ball question. It baffled me again how so many people’s answers were 10p, as predicted by Kahneman, especially in a room full of university students.
Another example that Kahneman gives, which shows the differences between System 1 and 2 is through the Muller-Lyer illusion (below).
When asked which of the two lines is bigger, most people think it is obvious that the bottom line is bigger. However, by measuring them with a ruler, they are the same size. Once you have been given this information, your System 2 now knows that they are the same size. However, despite this, System 1 still sees these lines as equal. To resist the illusion, Kahneman concludes that you must recognise the illusion and recall what you know about it.
The bat and ball problem and the Muller- Lyer illusion don’t even touch the surface of the detail that Kahneman goes into in his book ‘Thinking, Fast and Slow’. Its use of examples and implementation in the real world definitely grasped my attention. Having just finished this book, I am intrigued to see what other Behavioural Economics based books I can get stuck into next. Next on my list are Misbehaving and Nudge, which are both written by Richard Thaler.