Daniel Kahneman



Daniel Kahneman (born March 5, 1934 in Tel Aviv, in the then British Mandate of Palestine, now in Israel), is a key pioneer and theorist of behavioral finance, which integrates economics and cognitive science to explain seemingly irrational risk management behavior in human beings.

He is famous for work done in collaboration with Amos Tversky and others in establishing a cognitive basis for common human errors using heuristics and in developing prospect theory.

Kahneman spent his childhood years in Paris, France and moved to Palestine in 1946. He received his B.Sc. in mathematics and psychology from the Hebrew University in Jerusalem in 1954, after which he served in the Israeli Defense Forces, principally in its psychology department. In 1958 he went to the United States and earned his Ph.D. in Psychology from the University of California, Berkeley in 1961.

Currently a faculty member at Princeton University and a fellow at Hebrew University, he is the winner of the 2002 Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel for his work in prospect theory, despite being a research psychologist and not an economist. In fact, Kahneman claims to have never taken a single economics course &mdash; he claims that what he knows of the subject he and Tversky learned from collaborators Richard Thaler and Jack Knetsch.

In explaining why he entered the field of psychology, Kahneman once wrote:


 * It must have been late 1941 or early 1942. Jews were required to wear the Star of David and to obey a 6 p.m. curfew. I had gone to play with a Christian friend and had stayed too late. I turned my brown sweater inside out to walk the few blocks home. As I was walking down an empty street, I saw a German soldier approaching. He was wearing the black uniform that I had been told to fear more than others - the one worn by specially recruited SS soldiers. As I came closer to him, trying to walk fast, I noticed that he was looking at me intently. Then he beckoned me over, picked me up, and hugged me. I was terrified that he would notice the star inside my sweater. He was speaking to me with great emotion, in German. When he put me down, he opened his wallet, showed me a picture of a boy, and gave me some money. I went home more certain than ever that my mother was right: people were endlessly complicated and interesting.

Notable contributions

 * anchoring and adjustment
 * availability heuristic
 * base rate fallacy
 * conjunction fallacy
 * framing (economics)
 * loss aversion
 * peak-end rule
 * preference reversal
 * prospect theory
 * representativeness heuristic
 * simulation heuristic
 * status quo bias