3-2-1 David Kahneman's Reading at Poets and Prose

On December 7, 2011, I went to see author Daniel Kahneman at Poets and Prose in D.C. Kahneman is a psychologist and was there to discuss his new book entitled “Thinking, Fast and Slow.” The author is a psychologist who has won a Nobel Prize in Economics, and this book discusses human psychology in relation to economics. Although psychology and what little I know about economics interests me, I went into this reading anticipating the confusion I was sure I was going to have to endure. On the whole, I did manage to grasp a few interesting points from the experience.

1 Kahneman divides the human decision making experience into System 1 and System 2. System 1 is the more emotional aspect of decision-making that comes from prior assumptions and habitual experiences in the past. System 1 is responsible for a lot of mistakes because of all of the assumptions involved in this process. System 2, although more logical, is somewhat lazy and tends to rely on System 1. Most people do not have as much control over System 2 as would be necessary for good decision-making.

2 The second point of Kahneman’s discussion revolved around the idea that humans are rational, which is a fundamental assumption relied upon by economists. The author feels this assumption is false and leads to many problems arising for individuals and society as a whole. Kahneman does not believe in assuming that people are rational, but rather that presuming that we are leads to financial crisis like the one we are facing at the moment. System 1 leads people to be optimistic in their decision making process and this optimism is more powerful than System 2, resulting in many people finding themselves in financial difficulty.

3 Humans need to be more pessimistic and more aware about their emotional judgment calls. He talked about how as humans, we are better at solving other people’s problems and seeing the flaws in other people’s logic than our own. He says that if we can improve upon our judgments of other people, and teach ourselves to become more sophisticated along these lines, society as a whole will improve.

I’d like more explanation about how to improve upon our judgment skills and our System 2 level of functioning. Part of me realizes that this is probably discussed in the book, but that leads me to my next point of clarification.

Kahneman said that although he felt reading his book would be beneficial for people, he doubts it will help improve their decision-making process. He said that writing the book certainly did not help him improve upon his own, but then why read it? He stated that he is a pessimist at heart, so this could be part of his reason for saying so, but I still wanted more clarification about why he feels reading his book is worthwhile.

Question: Can people’s knowledge of their own emotions and decision-making process help improve their wellbeing and society in a broader sense or does it simply make it easier for people to anticipate the consequences of these bad decisions? In other words, are bad decisions inevitable?