Thinking, Fast and Slow: Part 4, Chapter 33 Summary & Analysis

Kahneman presents another puzzle, asking the reader to set compensation for a victim of a violent crime—in this case, a man who lost his arm after being shot during a robbery. The puzzle asks, should the store in which the man was shot (either his regular store, or a different store he rarely went to) make a difference in the compensation amount? When people evaluate these two scenarios at the same time (called joint evaluation), most people believe that the compensation should be the same in both situations, because location should not be a factor.

When people are given one option or the other (rather than both together), they assign a much higher compensation to the version in which the store is not his regular store, because they see it as more poignant. Seeing only one option is how people normally experience life: alternatives that might change our minds or affect our decisions are absent.

Another economic experiment focused on these kinds of reversals. In this experiment, participants are told that they have a choice between two bets, played on a roulette wheel with 16 sectors. Bet A: 11/36 to win $160, 25/36 to lose $15. Bet B: 35/36 to win $40, 1/36 to lose $10. People usually prefer bet B. But, if they imagine that they own each bet and must determine the lowest price at which they would sell it, the selling price is higher for A than for B. This experiment was surprising to economists, but they accepted that individual choice can depend on the context—a clear violation of the idea that people are rational and make the same choice in every scenario.

The fact that evaluation depends on context and categories is proven in this example: John is 6. He is 5 feet tall. Jim is 16. He is 5 feet 1 inches tall. Individually, everyone will agree that John is tall, and Jim is not. But the question “Is John as tall as Jim?” yields a different answer, because it prompts a direct comparison.

Kahneman next asks readers to imagine that they have been asked to contribute money to help set up pollution-free breeding locations for dolphins. People can come up with an amount by translating their attitudes towards dolphins onto the scale of their normal contributions (particularly referencing contributions to environmental issues).

On another occasion, readers might be approached to support medical check-ups for farmworkers, who have a higher rate of skin cancer. People’s contributions reflect how urgent they feel the issue is, particularly in comparison with other medical concerns.  In single evaluation, the dolphins generally attract larger contributions. But taken together, the issues are represented differently, because people feel that humans deserve more aid than animals.

Reversals can be found in the justice system as well. In mock juries, people assessed pairs of cases. In the first case, a child suffered moderate burns when his pajamas caught fire; the firm that produced the pajamas had not made them fire resistant. In the second case, the unscrupulous dealings of a bank cost another bank $10 million. In single evaluation, the bank was awarded higher damages than the child. In joint evaluation, sympathy toward the individual victim prevailed and the jurors awarded higher damages to the child.

In another study, psychologists compared different administrative punishments that can be imposed by government agencies like OSHA and the EPA. The punishments given by an individual agency seem sensible, but between agencies appear incoherent. A fine for a serious violation of regulations concerning worker safety is capped at $7,000, while a violation of the Wild Bird Conservation Act can result in a fine up to $25,000. One can see the absurdity only when the two cases are viewed together.