- Jun 18, 2022
Life is a great test, and everyone has to make his own decision among various choices every day. Of course, we all think that we have made the appropriate and reasonable choice. In the view of traditional economists, it is because each of us is rational and selfish, and we must aim to maximize our own economic benefits. No one has ever doubted that this understanding, which has become commonplace, is as natural and free as the air we breathe every day.
It wasn't until Daniel Kahneman, a psychologist by training, began to move from his traditional field of work to the study of choice. Kahneman found from numerous psychological behavioral experiments that our choices are not always illuminated by the light of reason that we expect. From a psychological point of view, choices are often controlled by the working patterns of the brain stimulated by a problem. Even under the same problem, the brain adopts different decision-making patterns, and the final choices are very different.
In order to distinguish our two working modes of thinking in the same mind, Kahneman named System 1, a way of thinking based on experience and intuition. System 1 tends to make choices based on contextual inspiration, association, and the picture of the past inherent in the brain, and usually simplifies the answer to the question it faces. There are also times to empathize with the same problem or make decisions based on cues. The unthinking rapidity of these decisions reflects an empirical judgment of risk over the long course of human evolution, which takes less time, responds quickly, and consumes less energy.
System 1 corresponds to a way of thinking and decision making in the brain, named System 2. System 2 consumes more energy, makes decisions slowly and pays more attention. It can decide whether to accept the views and feelings of System 1 or even reject the conclusions of System 1. System 2 looks thoughtful but it is lazier. To come to a conclusion.
In particular, when we are facing the stage of choice and decision, we tend to be unconsciously controlled by System 1, unless you perceive something wrong and start to consider more basic and general data to prove System 1, System 2 will slowly start up and finally give its judgment. For example, Lao Wang is very shy and silent, but very helpful, but has little interest in them and the real world. He values tradition, does things properly, pays attention to details, and is very sensitive to numbers. So for such a description, let's judge what Lao Wang's most likely occupation is. A farmer, a driver, a salesman, an accountant, a doctor or a librarian. In fact, this typical description will start System 1 to conduct association and inspiration according to "similarity", "representativeness" and "typicality". And in fact, if we think about it in system 2, it's more accurate to think about the base probability of sociodemographic distribution of these occupations than it is to think about the similarity in System 1, and this example actually tells us that the base probability is more important in many decisions. As in the venture capital industry, a subjectively "good" project is usually not much less risky than the industry average.
From this perspective of decision analysis, the "representativeness" of this description basically has no impact on prior probability, sample size and results presented, and is not particularly important for our prediction and decision making. At the same time, it also brings about problems such as "regression".