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Thanks for downloading the More or Less podcast.

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We're your weekly look at the numbers in the news

0:48

and in life. I'm Charlotte McDonald.

0:55

One of our heroes on More or Less died

0:57

this week. Daniel Carleman won

0:59

the Nobel Memorial Prize for economics and

1:02

he wasn't even an economist. Not

1:04

only that, he wrote a best-selling

1:07

book too, Thinking Fast and Slow.

1:09

He came on our show and our

1:11

presenter Tim Hafford has interviewed him many

1:14

times. So when we wanted to talk

1:16

to someone about the importance of Carleman's

1:18

work, who better than our Tim? Hello

1:21

Charlotte. I think we can all admit

1:23

that Daniel Carleman was one of the most important names

1:25

in economics, but he wasn't actually an

1:27

economist, was he? How did that happen? No,

1:29

he was a psychologist. I would say he's one

1:31

of the most important social scientists of the last

1:35

50 years. He was incredibly influential and

1:37

he, with his long-time collaborator

1:40

Amos Tversky, really

1:42

asked fascinating questions about

1:45

how the human mind works, how

1:48

we make decisions, how we form

1:50

judgements, how we perceive our own

1:52

happiness, how we think about probabilities.

1:55

And it turns out, although he was not

1:57

an economist and I think not especially in

2:00

interested in economics. It turns out

2:02

that these questions are very important for

2:04

economics. And so a

2:06

fellow Nobel Prize winner, Richard Thaler, took

2:10

many of Kahneman and Tversky's ideas

2:12

and brought them into economics where

2:14

they proved to be very influential.

2:16

And so I think not a

2:18

huge shock at all that

2:21

he ended up winning the Nobel Prize, Nobel

2:23

Memorial Prize, I should say, for economics, even

2:25

though he wasn't an economist. And that was

2:27

more than 20 years ago. And he continued

2:29

to influence people's thinking since then. So

2:31

what is Kahneman's work all about then? The

2:33

most famous idea, I guess, is that the human

2:35

mind has two systems. There's an intuitive system

2:38

that forms impressions and forms judgments

2:40

very quickly. And then there's a

2:42

more effortful, more ponderous system that

2:44

thinks things through. And I think

2:47

it's helpful to consider a

2:49

parallel with the way our

2:51

visual system works. So I can show you

2:53

an optical illusion and

2:55

it will fool you even if

2:58

you know it's an optical illusion. Your mind just

3:00

perceives at least two lines or whatever

3:03

in a certain way and will make

3:05

a predictable mistake. And what Danny and

3:07

Amos were doing was showing that we

3:10

would also make predictable mistakes or

3:12

exhibit predictable biases in the way that we

3:14

very quickly formed judgments.

3:17

And as with the optical illusion, even

3:19

if the mistake was pointed

3:21

out to you, you might well stick by

3:23

your original judgment. Here's an example Kahneman

3:26

told us back in 2012. But

3:54

fast thinking is that an idea came to

3:57

your mind immediately. Yeah, I thought PhD was

3:59

the first thing. And she seems so smart.

4:01

Yeah, that's it. And so

4:03

you fill in and

4:05

what you do actually is you

4:08

determine age four,

4:10

very precautious, and then you look for

4:12

a degree that matches your impression of

4:15

how precautious she is. Now

4:17

statistically, this is absolutely the wrong way

4:20

to go about it. Actually,

4:22

in fact, this is very weak

4:24

evidence. She was four years old

4:27

then and she's probably quite

4:29

bright. That really doesn't tell

4:31

you what kind of a degree she's going

4:33

to get. It's very, very weak evidence. And

4:36

presumably there is other evidence

4:38

that we could call to mind if we

4:40

thought about it for a moment about which

4:43

degrees are most likely and most people

4:45

don't get PhDs. That's the

4:47

first thing you should think about. It's called

4:49

a base rate. You should think how likely

4:51

is this outcome. And

4:53

then is the evidence that I

4:56

received sufficient to move very far from

4:58

that likely outcome? And the answer in

5:01

this case is clearly no. There

5:03

are two things that people don't think

5:05

about in this example. They don't think

5:07

of the average of the most likely

5:09

outcome. And they don't

5:12

think of the number of other factors

5:14

and the number of other facts about

5:16

Julie that they do not know. What

5:19

we don't know, we really don't think

5:21

about. And that makes

5:23

thinking properly about statistics extremely

5:25

difficult. Daniel Kahneman made his name

5:28

and became very important, influential

5:30

to economists. When his book came out,

5:32

Thinking Fast and Slow, that really made

5:34

his name globally famous. And it is

5:36

a fabulous book. And it ranged

5:38

across not just the work on probabilities and

5:40

on judgment, but for example, work

5:43

on happiness. Kahneman's work on happiness is really

5:45

fascinating. So he points out, it's quite a

5:47

simple point, but it's counterintuitive. How

5:49

we experience pleasure or pain,

5:51

happiness or unhappiness while it's

5:53

going on is different

5:56

from how we evaluate it

5:58

in hindsight. To give you a... a

6:00

simple example. You're listening to

6:02

a concert, you love the music, you're completely

6:04

transported, you listen for nearly an hour and

6:06

then in the last moments somebody's

6:09

mobile phone goes off and

6:11

you think to yourself, oh it's just ruined everything.

6:14

And Danny says, well in what sense has it

6:16

ruined everything? You were listening

6:18

for 59 minutes, loving it, and then

6:20

the last minute was spoiled. How could

6:22

it possibly be that it's ruined everything?

6:25

But I think we would all agree,

6:27

including Danny, that there is a

6:29

sense in which having the ending of

6:31

the concert ruined, did ruin

6:33

everything. It didn't ruin the experience but

6:35

it ruined the memory, it

6:37

ruined how we evaluated the entire experience

6:40

with hindsight. And I

6:42

think that's a fascinating distinction. There's a

6:45

wonderful study he used to talk about,

6:47

I hope people aren't eating because it's

6:49

all about cameras up bottoms, he wrote

6:51

about colonoscopies, an experience of having colonoscopies

6:54

which you know 20-30

6:56

years ago was particularly uncomfortable and

6:58

they did an experiment where for

7:01

some people they would have the colonoscopy

7:03

and it's you know it's a camera up your

7:05

bum, it's quite uncomfortable. And

7:07

for other people that have the colonoscopy

7:09

and then when the colonoscopy was finished

7:12

they wouldn't tell the patients that the

7:14

colonoscopy was finished, they'd just leave the

7:16

camera in for another five minutes but

7:19

they wouldn't be wiggling it around so it wasn't so uncomfortable.

7:22

Now in terms of your experience at

7:24

the time obviously an

7:26

uncomfortable 20-minute colonoscopy is

7:30

less unpleasant than an uncomfortable

7:32

20-minute colonoscopy plus five

7:34

minutes of extra camera up your bottom. I mean

7:36

you would just like the camera to be taken

7:38

out and then you could go about your business

7:41

but when people remembered the

7:43

experience the ones who'd

7:45

had the extra five minutes actually preferred the

7:47

experience in hindsight and they couldn't articulate why

7:49

they didn't really know what had happened but

7:51

they just you know it wasn't that bad

7:54

in the end and because it ended in

7:56

a less unpleasant way they

7:58

retrospectively re-evaluated the entire

8:00

experience. I think that just gives

8:02

you a sense of the kinds of examples that

8:05

Danny would come up with and how counterintuitive they

8:07

could be. I have to say, Tim,

8:09

over the years there have been a handful

8:11

of sort of quite famous economists

8:13

who we've had on the show that you've

8:15

interviewed and you've had a lot of warmth

8:17

and enthusiasm for many of them. But I have

8:20

to say, Daniel Kahneman must be absolutely the top

8:22

I would have thought, as in you're always very

8:25

excited at the chance of getting to speak

8:27

to him. You've interviewed him several times, so

8:29

what was he actually like? Yeah,

8:32

I feel very lucky that I did get the

8:34

chance to interview him on a number of different

8:36

occasions. He's very charming. He will

8:38

often surprise you. He would

8:42

be quite impish. When I think about

8:44

various Nobel Prize winners I've interviewed,

8:47

Kahneman is the one who has

8:50

really stuck with me when I'm trying to make a

8:52

decision in my own life. Kahneman's

8:55

ideas spring to my mind. I find myself

8:57

asking again and again, what

9:00

would Danny say about this? What would Danny do

9:02

about this in a way that it

9:04

doesn't happen with the other great economists that

9:06

I've interviewed? By the way, I told him

9:09

this once and he found the whole thing

9:11

completely ridiculous. He said, I'm not

9:13

a guru. He just thought he was absurd.

9:16

But there you go, that's Danny. And

9:19

that's it for More Less This Week. We're going to

9:21

put that whole 2012 episode with Daniel

9:23

Kahneman into our podcast feed, so if you

9:25

want to hear more from the great man

9:27

itself, find it there. Do drop

9:29

us an email if you've seen a

9:31

number you think we should take a

9:34

look at. It's more or less at

9:36

bbc.co.uk. Until next time, goodbye.