Tuesday, October 15, 2002

The Nobel Prize for Economics

That was my topic of conversation with Geraldine Doogue on Monday.

The most interesting winner isn't even an economist. He is the psychologist Daniel Kahnerman. The most interesting thing I have read about him is in this article by Jason Zweig in the US magazine Money in May 2001.

"Kahneman was born in Tel Aviv in 1934, but his French parents returned home to Paris when he was three months old. Six years later, as Kahneman was finishing first grade, the Nazis invaded France, and his family was forced to wear the yellow star that marked Jews for deportation to the death camps. His father, a research chemist, was taken away but then released because he was considered useful to the war effort. The family escaped to unoccupied France and spent the rest of the war in hiding and on the run. His father died in 1944, and 12-year-old Danny moved to Palestine with his mother two years later.

Kahneman thought of becoming a physicist or economist, but he ended up studying math and psychology at Hebrew University in Jerusalem. He finished his B.A. at the age of 20. Having survived so many horrors, he had already developed a deep distrust of things that others take for granted--the notion that humans are rational, the confidence that knowledge can solve all problems, even the belief that there's a God. He entered the work force as an unorthodox thinker determined to challenge the status quo."

There is much, much more. As I said, it is the best account, and it was written 18 months ahead of the Nobel.

Here are two quizzes:

Quiz One:

600 individuals contract a severe illness. There exist two options:
A. Definitely saving 200 people;
B. There is a 33% chance of saving all the patients and a 66% chance that all will die.

Which would you choose?

Quiz Two:

600 individuals contract a severe illness. This time, the two options are:
A. 400 patients will definitely die.
B. There is a 33% chance that nobody will die.

Which would you choose?

Kahneman found that

Quiz One: 72% of subjects chose the first option.
Quiz Two: 78% of subjects chose the second option.

You may have noticed by now that Quiz One and Quiz Two are the same.

It felt a bit funny to be talking to Geraldine Doogue about such matters on Monday. Everything feels strange at the moment.