Kahneman, D. (2011). Thinking, fast and slow. New York: Farrar, Straus and Giroux.
This is an excellent summary of the latest thinking in the psychology of thought judgment, and decision making, written by one of the foremost scholars in the area. Highly recommended.
In this book, Danny Kahneman summarizes his life of research on human psychology. His early work has focused upon attention and decision making. Today he has shifted to the positive psychology movement, studying people's judgments of happiness and contentment.
Much of his work was done with his long-time collaborator, Amos Tversky. Together, they studied how people make decisions and judgments. Their work has demonstrated that many of the underlying assumptions of economists are faulty. The work has been controversial, but its impact was also substantial, sufficient for the Nobel committee to present Kahneman the Nobel Prize in economics.
(Technically, this is not a Nobel prize because it was added afterwards, but it is treated as equal by everyone. Unfortunately, Tversky died before the prize was awarded, and the rules state that only live people can get it. Kahneman has stated that he considers it a joint prize for the two of them.)
The basic theme builds upon a highly oversimplified view of human thought. We have two systems, says Kahneman, one fast (and subconscious) and one slow (and conscious). The two operate according to very different principles and often reach opposite conclusions. The fast system is based upon experience, the slow one upon conscious reasoning and deduction. It can be very difficult for the slow system to over rule the fast one, which thereby gives rise to many human idiosyncrasies.
Why those names? Fast and slow? Actually, Kahneman calls them System 1 (fast) and System 2 (slow). Ich. Come on, Danny, how are we supposed to remember which is which - couldn't you have called them slow and fast?
In my own work, I thought two systems was far too great a simplification, so I used three: visceral, behavioral, and reflective. My reflective level is basically the same as Kahneman's Slow, System 2. But I have a finer level of analysis for the fast system.
I have known both Kahneman and Tversky for a long time. I worked briefly with Tversky in he early 1960s and met Kahneman soon afterwards. Both are brilliant, both have contributed much. I have long used their work and examples in my own thinking and writing (although I resisted Kahneman's attempts to get me to use pupil size as a measure of Attentional load).
The book covers a wide range of phenomena, producing very important, counter-intuitive insights to many aspects of everyday life.
If there is any weakness, it is that most of the studies done with Tversky relied upon simple examples and questionnaires rather than on real behavior, in context. Draw your own conclusions: the examples, although artificial, are very compelling, especially when you will fall into his carefully constructed traps. Nothing is more convincing than your own wayward behavior. No wonder even hard-headed, rational thinking economists have been forced to reconsider their logical, sensible axioms. The axioms may be logical and sensible, but they do not describe real human behavior. Kahneman's work has led the way. The rest of us need to follow the path.
Link to book at Amazon.com Thinking, Fast and Slow