Kahneman’s Thinking, Fast and Slow from the Standpoint of Old Behavioural Economics (For the 2012 HETSA Conference) Peter E. Earl School of Economics, University of Queensland, St Lucia, Brisbane, QLD 4072, Australia, email:
[email protected] Abstract Daniel Kahneman’s bestseller Thinking, Fast and Slow presents an account of his life’s work on judgment and decision-making (much of it conducted with Amos Tversky) that has been instrumental in the rise of what Sent (2004) calls ‘new behavioural economics’. This paper examines the relationship between Kahneman’s work and some key contributions within the ‘old behavioural’ literature that Kahneman fails to discuss. It show how closely aligned he is to economic orthodoxy, examining his selective use of Herbert Simon’s work in relation to his ‘two systems’ view of decision making and showing how Shackle’s model of choice under uncertainty provided an alternative way of dealing with some of the issues that Kahneman and Tversky sought to address, three decades after Shackle worked out his model, via their Prospect Theory. Aside from not including ‘loss aversion’, it was Shackle’s model that was the more original and philosophically well-founded. Keywords: Prospect Theory, satisficing, bounded rationality, choice under uncertainty JEL Classification Codes: B31, D03, D81 1. Introduction In his highly successful 2011 book Thinking, Fast and Slow Daniel Kahneman offers an excellent account of his career-long research on judgment and decision- making, much of it conducted with the late Amos Tversky. Kahneman was awarded the 2002 Bank of Sweden PriZe in Economic Sciences in Memory of Alfred Nobel for this work.