Saturday, April 6, 2024

Daniel Kahneman - The man who made economics again a social science


Daniel Kahneman died recently, and he may be the singular most important economist (non-economist) in the last few decades. He won the Nobel Prize in Economics, but he really was a psychologist who happened to work on foundational economic problems associated with choice and decision-making. He was behavioralist. Hence, he focused on the psychology of how individuals made choices. At the primal level, economics is about choice theory not just in theory but in the laboratory of testable behavior.

From the normative of how agents should decide, Kahneman focused on the positive of how individuals really decide. His focus was teasing out the actual behavior of individuals with all their flaws and biases. Humans are only human which became a revelation for many economists who only wanted to deal with modeling in a rational manner. Of course, we need to focus on both how decisions are made in a perfect world and how they are made in the real world.

What made Kahneman a great researcher was his willingness to ask and test simple questions on behavior and then let the data speak for itself. He could be wrong, but he was always willing to engage with others and see if there was better theory. He will be missed as someone who changed minds. 

No comments: