Please talk about Part 2: Heuristics and Biases in this thread or feel free to create your own threads.

Kahneman's take on heuristic decision-making is that they lead us astray. An alternative view is Gerd Gigerenzer's Adaptive Toolbox view which holds that heuristics can efficiently lead to good decision-making in the right environments. His classic example is that people are notoriously bad at Bayesian decision-making when information is expressed in terms of probabilities (e.g., probability of .4). But if you give people exactly the same problem using frequency information (e.g., 4 out of 10), their decision-making performance improves dramatically. Gigerenzer argues that is because information naturally comes to us in the form of frequencies (e.g., seeing that 4 out of 10 shirts are blue) while probability as a means of expressing information has only been around since the 17th century and has to be explicitly taught and learned.

This is my favorite part of the book. What's fascinating is that there are systemic biases that affect humanity in general. Quirks in how we interface with and understand the world.

It was always a fascination of mine during high school that such a vast portion of society can completely disagree with other vast portions of society. Essentially, I was trying to harmonize the idea that people are at the same time rational, yet hold false conclusions. How does that make sense? In many cases, the answer is that the primary causal nexus includes systemic biases that apply species wide.

Availability Heuristic is one of the most commonly referenced heuristics in the book. It's the proper name for the concept that while the universe is infinite, our minds are finite. We will always be missing some information about nearly every subject, which taints our conclusions.

In the author's words - What You See Is All There Is.

Yeah ... really - and this in itself is a perfect example of what I've been suspecting all along. A whole lotta' words to plow through with basic knowledge that we all knew already ... think before you speak - don't just jump in on intuitive feelings and WYSIATI.

Which is also exactly as I suspected ...

Ho Hum ... I'll leave you fine scholars to bend your minds on this one. I've closed the book on it, in more ways than one - ha ha!

I think that whenever a book can make us think more often about the true basis of our thoughts, encourage us to be detectives of our own minds, that's a good thing. But many people I feel want just the opposite. They want to take their every thought and judgment at face value and to believe what is basically a myth, that we are perfectly rational deciders whose reports about our thinking must be correct. This is a strange thing to believe when you consider that rational people aren't seen as warm or particularly human. Remember Spock?

It bothers me that heuristics are cast as biased or bad. Can you imagine if we didn't use heuristics? We'd stand around all day trying to make a decision. What I like about this concept is learning about and then recognizing these heuristics. You can change your mind when you look objectively at why you made a choice. Or, you might decide that's an oaky choice anyway,

Yes, your sentiment makes sense. Denise Cummings, above, made much the same point.

Kahneman (and Tversky) had a complex relationship with the real world. Much of the attention received by their work was because they successfully challenged the prevailing methodology in economics by showing that people do not, in fact, generally behave as fully-informed rational agents. In fact there are systematic biases to people's sub-rational behavior, and in this book Kahneman made a good case that those are generally due to the effect of heuristics.

Interestingly, their research also showed that people quickly adapt to incentives and give up heuristic biases if substantial amounts of money are involved. That is, "professionals" in a market don't fall for the heuristic errors over and over on any substantial scale. So in fact, standard economics provides a good model of behavior in markets dominated by professionals.

Where their "behavioral economics" needs to be better applied is in providing safeguards so that professionals don't have an incentive to systematically rip off the casual participants in the market, like consumers of medical care or housing.