Daniel Kahneman: the Nobel Prize for Economics awarded for Decision-making psychology

Abstract

After 24 years the Nobel Prize for economics has again been awarded to an expert on the cognitive processes underlying decision-making. After the theorizer of bounded rationality, Herbert Simon, the prestigious award was attributed on 9 October 2002 to Daniel Kahneman, "for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty". It is certainly not forcing the issue if we attempt to identify a link between the cognitive scientist Simon and the cognitive psychologist Kahneman. In fact, the former demonstrated how powerful formal models of rationality, put forward by logicians, mathematicians and economists to tackle problems involving choice, are faulty of an unjustified faith in man's rational capabilities. Simon (1981) in fact affirmed that "What a person cannot do he will not do, no matter how much he wants to do it", demonstrating through the direct observation of managerial behavior that organizations and individuals inside the organizations accept "good enough" alternatives. This behavior is not dictated by the fact that decision-makers prefer to act in this way, but because they have no other choice owing to the cognitive constraints that characterize the human mind. Kahneman, on the other hand, has elaborated an alternative theory to the standard decision-making theory. In this theory, the traditional rationality criteria used to define the economic player no longer fulfil the role of reference parameters used to assess the systematically distorted performance of individuals when making a decision or an estimate, and distortions are not regarded as an exception or the expression of human stupidity, but rather the normality "generated" by the same cognitive constraints that Simon argues underlie the bounded rationality of human behavior. Born in Tel Aviv in 1934, Daniel Kahneman studied at the Hebrew University of Jerusalem where he graduated at the age of twenty in Psychology and Mathematics. He moved to the United States where he enrolled at the University of California in Berkeley where he was awarded a Ph.D. in Psychology in 1961. After teaching Psychology at the Hebrew University in Jerusalem, he became Professor of Psychology at the University of British Columbia and the University of