Kahneman Vs Psycho

in this chapter the author discusses how the way a statement is structure can have different meanings. Kahneman uses the example of the Green and Blue cabs and the witness. In other words, jumping to conclusions is something that we do all the time. We create stereotypes based on information we consider more convincing like the case of the witness. The author talks about two different statistical base rates. Kahneman states that “statistical base rates are generally underweighted…. Casual base rates are treated as information about the individual case and are rarely combined with other case-specific information” (p.168). moreover, the author has an opinion that can be consider different to what we have been taught: stereotypes are neutral.

They focused on how the variation in the wording of problem where we have to make choice can make a difference. Kahneman discusses some contributions by individuals like Gustav Fechner and his obsession with the relationship between mind and matter that is “find the psychological laws that relate the subjective quantity in the observer’s mind to the objective quantity in the material world” (p. 272). Moreover, the expected value is also a topic of discussion. According to Kahneman, Bernoulli believed that people do not evaluate gambles assessing probabilities. Most of the people go for the sure thigs. Kahneman says that Bernoulli’s idea was that “people’s choices are based not on the dollar values but on the psychological values of outcomes, their utilities” (p.270). The utility function of Bernoulli was useful not only to explain the making of choices when risk is present but also his analysis of risk attitudes is currently used, and with that function he explained the Petersburg

Therefore, the author of this book believes that “you need to know the difference before you can predict the utility of an amount of wealth” (p. 275). He supports his argument with the example of Anthony and Betty, which was discussed in class. This example shows that it is obvious that Anthony and Betty are not facing the same option and for that reason, they won’t make the same decision. And that is why Bernoulli is wrong. Therefore, the expected utility theory can explain the situations of certain individuals, in this case Anthony’s and the risk aversion; however, it cannot explain the reasoning of others due to the lack of a reference point in his theory. Kahneman concludes this chapter explaining why this theory survived for so long with its evident flaws. He believes that since it was already accepted and used, people got blind and could not notice those errors. Deliberating is hard and we tend to avoid