The grandfather of economics

I propose a brief mental exercise. Suppose there are two hospitals in a town. 45 babies are born per day in big babies and 15 in small babies. Generally, half are girls and half are boys, but the percentage varies from day to day. 60% of which hospital has more days for women? Big, small, or both?

Most of us would answer that both hospitals would be the same number, but the correct answer would be the smaller hospital. It is easy to get extreme results in a small hospital, even if both have the same probability of giving birth as boys or girls (50%). The larger the sample, the more normal the results.

Now, if your answer is not correct, don't worry. Even professional statisticians get wrong answers when you think quickly. This phenomenon is called the “law of small numbers” and is one of the many discoveries of Daniel Kahneman, the first non-economist to win the Nobel Prize in Economics (2002) and who died last week. This rare bird occurred because it integrated psychology into economics, especially in the area of ​​decision making.

Contrary to what some theories of traditional economics believe, humans are not rational in making decisions, but we have cognitive and emotional biases and we use mental shortcuts that can go against us and lead us astray. .

concepts such as regression to the mean (an abnormal result usually follows a normal result); loss aversion (why does losing a thousand pesos hurt us more than gaining it?), delusion of attention (nothing in life is as important as you think it is, when you think about it); Or he can distinguish between System 1 (fast and intuitive thinking) and System 2 (slow and reflective thinking) when making decisions and how to use each, depending on the moment, that makes a difference. His work was based on economic decisions, but reached out to issues such as medical negligence, international political negotiations, and baseball talent evaluation.

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But beyond his discoveries, Kahneman was a rare intellectual at this time because of his personal characteristics. On the one hand, in periods of cyclical dominance, he was cautious. They say Kahneman is a brilliant guy in anyone's eyes but himself. It was not characterized by the arrogance of many intellectuals and academics, but rather insecurity. I doubted everything. If we think about it, it is essential for any academic and intellectual researcher. That is why he relied on his partner Tversky in many of his studies.

On the other hand, Kahneman's influence was multiplied by his popularity because he had a great ability to make his ideas accessible to the general public. Explain them in a way that everyone can understand. His inventions are simple and brilliantly clear that have helped millions of people think better.

In 2016, in an interview with The Times, he was asked how he would like his obituary to be. He himself said he wanted to be seen as the “grandfather of behavioral economics”.

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