Kahneman wins Nobel Prize in economics for behavioral study
Psychology professor Daniel Kahneman received a call yesterday morning from someone with a Swedish accent. It was no prank, the man assured him, Kahneman was a winner of this year's Nobel Prize in economics.
Kahneman modestly accepted a long round of applause at a press conference yesterday, before telling the audience how he learned of his award.
"I hope it doesn't mean too much, in a way," he said at the conference, explaining he has no plans to stop teaching or researching any time soon.
While Kahneman has co-taught PSY 101 since becoming a professor at the University in 1993, he said he has never taken a course in economics.
Kahneman was awarded the prize "for having integrated insights from psychological research into economic science, especially concerning human judgement and decision making under uncertainty," the Royal Swedish Academy of Science said in its public announcement.
Kahneman said he owes his success to "my choice of friends . . . I have been blessed not only with my collaboration in this University, but throughout my career."
Kahneman's wife, Anne Treisman — another world-renowned member of the University's psychology department — looked on proudly from the first row.
Vernon Smith, a law and economics professor at George Mason University, was the other recipient of the award and will share the $1 million prize money with Kahneman.
Kahneman explained his prizewinning work as "an attempt to provide a more realistic set of ideas for what the economic agent is really like."
In one of Kahneman's studies, he gave half of the participants a mug and the other half no mug. The results showed that people with a mug wanted to trade the mug for an average of approximately $7 cash, while the people without a mug valued the same type of mug at $3 cash.
The two acts are logically the same — trading a mug for money — Kahneman explained, but those with mugs did not want to give up something they already had.
This "very myopic" aspect of human decision making was, when Kahneman first started this line of research in 1969, not a widely accepted part of economic theory.
One of Kahneman's initial papers on this subject — which he wrote with Amos Tversky — was published in an economics journal rather than a psychology journal. Though that decision was "quite accidental," it might have been the reason he was accepting the Nobel Prize yesterday, Kahneman said.
The paper, "Prospect Theory: An Analysis of Decision Under Risk," was published in Econometrica in 1979.
At the conference, Kahneman said accepting the award was not entirely a happy event. Tversky, his colleague for many years, died in 1996.
"Surely we would have gotten it together," he said.
Kahneman said he — and Tversky — never imagined they would one day win the award. "I don't think we even joked about it, let alone hoped for it," he said.
Kahneman, also a professor in the Wilson School, was instrumental in the collaboration between the Wilson School and the psychology department, former Wilson School dean Michael Rothschild said.
He said the Wilson School graduate program has a psychology class requirement.
"It's an important part of our program," Rothschild said. "I think the Wilson School was singular among public policy schools in putting such an emphasis on psychology.
"I was convinced largely by Danny that it was very important that people [in] public policy have an understanding of human beings and how they operate," Rothschild said.
Rothschild said Kahneman's model was "systematic, supported by evidence and different from the standard economic model of how humans behave."
Kahneman, 68, has been the recipient of the Hilgard Award for Lifetime Contribution to General Psychology, the Wanen Medal of the Society of Experimental Psychologists and the American Psychological Society's Distinguished Scientific Contribution Award.
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