Tuesday, December 6, 2011

Daniel Kahneman, cognitive bias and Freud

There has been a great deal of interest in the publication of Daniel Kahneman’s new opus; Thinking Fast, and Slow.  He and his collaborator, Amos Tversky, are the founders of the “cognitive bias” school of decision-making. Their work has had a great impact on the field of behavioral finance. Kahneman makes the central distinction between fast and slow processes, the former based on intuition, and the latter on rational calculation. The former works well in situations designed for fast responses, for example, finding the shortest path to run away from a predator, but poorly in situations requiring forethought; for example, predicting the likelihood that the price of oil will rise next year.

Interestingly, Freeman Dyson, the physicist, has reviewed this book in the New York Review of Books, and points out, toward the end of his review, that Kahneman's distinction echoes Freud’s’ distinction between the ego and id. He goes on to note that Freud’s contribution was literary rather than scientific, but suggests that Kahneman's theory may not shed sufficient light on situations that provoke strong feelings, while Freud’s does.

I think Dyson has it half-right. The better analogy is to what is called Freud’s’ topographic model, in which the unconscious, preconscious and conscious levels of awareness interact in shaping a decision. The conscious process is calculative, the preconscious is intuitive, and the unconscious channels thoughts along lines associated with strong feelings such as anxiety, ambition and desire.

One of the central features of unconscious mentation is that it is repetitive. It is the source of our decision-making “ruts” because we feel compelled to repeat strategies that give us some secondary gratification, while keeping us from taking the risks to be really successful. For example, it is why someone might prepare inadequately for a talk, with the unconscious belief that if even if his performance is inadequate, people should like him for just the way he is!

The topographic model suggests that there are emotional as well as cognitive biases. The latter, cognitive biases, trip up the preconscious when a train of associations stimulated by an intuition leads us for example, to focus on the most vivid example, rather than on the most typical. The preconscious is vulnerable to short cuts. But the former, the emotional biases, belong to the unconscious domain, where we live out our life scripts and enter into relationships based on a models of relating we learned as children.

Consider again the case of Jon Corzine at MF Global, a subject of an earlier blog.  The Wall Street Journal published an article today suggesting that his colleagues had warned Corzine many months before the firm’s demise that his bet on Eurobonds was too risky. Yet he ignored them. Why? Was it because he was thinking too fast, as Kahneman suggests, or because his unconscious mentation --perhaps a fantasy of his “second coming” after his defeat in the New Jersey Gubernatorial race-- distorted his thinking process.  

The cognitive bias literature is exemplary as science, but it may be exploring domains that lack salience, that are based as Dyson suggests at the end of his review on “parlor games.” We need to introduce the unconscious.


  1. I think you've hit the nail on the head. Kahneman won the Nobel Prize partly because he repackaged Freud. This is not so surprising since if we really touch on unconscious (not pre-conscious) mentition there is bound to be a general reaction of distaste and rejection at the ideas stirred up in the general public, as, like it or not, we're all pretty much made out of the same cloth. That's why Freud, despite his importance in psychology, was never even close to winning a Nobel.

  2. After reading the review of Daniel Kahneman's new book, by Freeman Dyson, in The New York Review, Dec 22, 2011, I was left to wonder about why Dyson finds it 'regrettable' that Kahneman failed to mix the literary art of Freud with his own scientific research. Dyson says "Anyone who strives for a complete understanding of human nature has much to learn from both of them." He may well have said, '...from the three of them,' since Dyson also draws a brief comparison to Williams James's writing later in the review. Dyson notes the huge differences between James and Freud, and Kahneman, the deepest of which is that Freud and James were artists, Kahneman is scientific.
    Dyson, not short on praise for Kahneman in the review, says, "The scope of Kahneman's psychology is necessarily limited by his methods. His method is to study the metal processes that can be observed and measured under rigorously controlled experimental conditions." He is quick to credit Kahneman with making psychology an "experimental science with experimental results." Following his scientific methods, Kahneman has "revolutionized psychology" adds Dyson. But in the end, Dyson tempers the compliments by adding, Kahneman is an explorer of our more hum-drum cognitive process, and this too seems a curious observation on Dyson's part, since he goes on at great lengths about what he does like in Kahneman book.
    In saying, "Admirers of Freud and James may hope that the time may come when they stand together with Kahneman as three great explorers of the human psyche." Dyson is commenting that Freud and James are no longer in fashionable, and that Kahneman methods cannot currently handle the "violent and passionate manifestations of human nature." Dyson deems emotion and feelings to be the "territory of Freud," and presumable James. But is it? Kahneman has, in the past, touched on feelings like happiness and suffering without needing to mention Freud, or James. (The Riddle of Experience and Memory, TED). Perhaps in the near future new scientific methods will continue to allow others, like Kahneman, to remake psychology into a science. For now it is left up to others of mixing science with art, and not Kahneman. And this is as it should be.