Sunday, January 15, 2017
The book about Kahneman and Tversky
After writing "Moneyball" (which would inspire a great movie with Brad Pitt as manager of a baseball team), Michael Lewis knew from a review by economist Thaler and legal scholar Sunstein (authors of "Nudge"), that the biases that plagued the work of traditional baseball scouts and managers were just an example of a more general phenomenon that had been studied by Israelian psychologists Amos Tversky and Daniel Kahneman. The latter won the Nobel Prize in Economics in 2002, which would have been shared by his friend and co-author had he not died some years before, in 1996. He would also write the very successful book "Thinking, Fast and Slow." As a consequence of later paying more attention to Kahneman and Tversky, and of personally knowing the former, Michael Lewis has now published "The Undoing Project," about the lives and work of the two great psychologists and their close and eventually problematic personal and professional relationship. The book contains a valuable summary of their theories. To lecturers it is useful to have new ways of explaining things to a broader public (or to undergraduate students). For example, a good way to summarize their thoughts (especially Kahneman's) is that individuals care not only about money and material rewards, but also about emotions related to outcomes. Tim Harford in the Financial Times has praised the book, but expressed surprise that the first chapter is devoted exclusively to biases in basketball at the NBA with no mention of the two star pshychologists until the very end. Perhaps Michael Lewis had another Moneyball story but now about the Houston Rockets in basketball instead of the Oakland A's in baseball, but thought that the NBA story was not enough for a single piece. But then given the exagerated role that basketball plays in the book, perhaps Lewis could have done more to discuss the important contribution that Tversky made to the study of basketball: the "hot hand" phenomenon. For many years, a study by the late psychologist introduced among statisticians the idea that the "hot hand" really did not exist, but it was just a misinterpretation of a possible realization of a collection of random events. However, more recent work with more sophisticated statistical techniques has questioned the work by Tversky and others on this, and it seems that there could be reasons having to do with self-confidence and coordination that justify the existence of serial correlation among the shots of an individual player during a game. Although of course we are very bad at interpreting random events, the "hot hand" phenomenon is far from settled. Of course Lewis does not have time and space to discuss all the subtleties of scholarly work and debate. But perhaps those areas or characters that he emphasizes should be discussed more in depth. For example, Lewis stresses the role of Thaler among economists and Sunstein among legal scholars (and in the administration as "regulatory czar" with Obama) as promoters of the unorthodox ideas of Kahneman and Tversky. He also discusses the relationship between the two Israeli psychologists with an American psychologist, Paul Slovic, an expert in expert bias. Then, it is surprising that Lewis does not mention the controversy between Slovic (among others) and Sunstein, a great defender of the role of insulated expert agencies in the public sector. The book is very enjoyable nevertheless and will surely be very successful. The seller at the shop in Heathrow Airport (I was in transit) where I bought my copy had no doubt about it: "do you know "Nudge" and "Thinking Fast and Slow"? Then you'll like this!"