Heroes of Science Episode 4
Humans are not rational people and we use all these assumptions and short cuts when making decisions.
My science hero would probably be Daniel Kahneman, just because he’s the only psychologist to have ever won a Nobel Prize. Because there isn’t, currently, a Nobel prize in psychology. But he managed to win the one in economics because his work is in the crossover between science and economics. So, economists make these assumptions and they build models but they base them on the fact that humans are rational and that humans will behave rationally and make choices that will maximise the positive outcomes. What Kahneman, and his partner Tversky, showed is that that’s not true. Humans are not rational people and we use all these assumptions and short cuts when making decisions. Now that sounds like a really bad thing, and it is for the economists and their models, but actually in your day-to-day life, it’s positive.
So, if you sat around and weighed up all the pros and cons of every decision you were ever going to make, you’d never get anywhere because you’d spend all your time weighing up pros and cons! We use these heuristics, they call them, these short cuts, to make a decision that’s good enough. To make a decision that will do and a decision that 90% of the time will give us positive outcomes. And sometimes that can backfire, but most of the time it was good and that’s why we’ve evolved these short cuts because they helped our ancestors to survive. But if economists don’t take these biases and heuristics into account in their models, we can cause – or run into – big problems because humans don’t act in the way you necessarily expect us to, and I think that’s why I really admire their work.