Thinking, Fast and Slow: Part 4, Chapter 30 Summary & Analysis

Kahneman visited Israel several times during a period in which suicide bombings became a concern for bus riders. There were 23 bombings on buses between 2001 and 2004, which caused 236 fatalities. The number of daily bus riders was 1.3 million at the time. The risks were tiny, but that was not how the public felt about them—they avoided buses as much as possible. Emotion and vividness influence availability and thus judgments of probability.

The possibility of a rare event is likely to be overestimated particularly when the alternative is not fully specified. A psychologist recruited basketball fans and asked them to estimate the probability that each of eight given teams would win the playoff, focusing on one team at a time. Their estimates of each of the eight teams should add up to 100% probability, but instead they added up to 240%. With each question, a different team became the focus, and that team’s chances were overweighted.

Prospect theory and utility theory differ in that utility theory asserts that probabilities and decision weights are the same, while prospect theory holds that people’s decision weights are correlated with but do not exactly match probability. Psychologists at the University of Chicago found that decision weights in gambles were even less correlated with probability when the fictitious outcomes were emotional (“meeting and kissing your favorite movie star” or “getting a painful, but not dangerous, electric shock”).

Vividness and ease of imagining can change people’s decisions, as in this example: Urn A contains 10 marbles, 1 of which is red. Urn B contains 100 marbles, 8 of which are red. Drawing a red marble wins a prize. Which do you choose? About 30-40% of students choose the urn with the larger number of red marbles because of what Kahneman calls “denominator neglect.” A single red marble against an undefined white background seems to provide a lower chance than eight marbles against an undefined background, even though mathematically this is not the case.

Denominator neglect explains why there are many different ways of communicating risks. A vaccine that carries a 0.001% risk of permanent disability seems much safer than a vaccine that carries this description: “One of 100,000 vaccinated children will be permanently disabled.” People have a hard time translating percentages and fractions, and the different ways of framing create opportunities for people’s opinions to be manipulated.

Kahneman gives an example of a study that refutes part of prospect theory. Instead of receiving descriptions of gambles, people are given the choice between two buttons, each of which has a gamble. The expected value of each gamble is approximately the same, but one option is riskier than another (for example, one button would have 5% to win $10 while the other would have 50% to win $1). When participants press a button, an outcome is drawn based on the odds of the gamble. They are given many trials, and thus learn the consequences of pressing one button or another. In these “choice by experience” situations, overweighting the rare event is never observed, and underweighting is common. A possible explanation for this effect is that people almost never experience the rare event.

For comparison, Kahneman gives an example of two different people from whom a person may want advice. Adele is consistent and helpful, but not exceptional. Brian is not quite as friendly or helpful most of the time, but on some occasions he has been extremely generous. Adele is closer to a sure thing, and people generally prefer her because of their global representation of her (thus they do not overweight rare events).

This evidence is distinct from “choice by description,” because in the instance of 99% chance to win $1,000 and 1% chance to win nothing, our attention is called to the rare event, and thus we give it more concern than we would otherwise.