What Daniel Kahneman thought about economics: A reconstruction and critique

Drawing on Kahneman’s writings, his responses in interviews and our personal recollections, we reconstruct and critically assess his view of his contributions to behavioural economics, of developments in economics that have built on those contributions, and of earlier related work by economists. Kahneman always insisted that he was a psychologist, pure and simple. He saw his primary research programme as the study of intuitive judgement. While he believed that outputs from this programme could be usefully applied in economics, he differentiated his programme from most work in behavioural economics, including that of economists such as Allais and Markowitz who had proposed alternatives to expected utility theory from the 1950s. He saw behavioural economics as distinct from his approach because it retained the fundamental maximising structure of rational choice theory and represented psychological effects in ‘one deviation at a time’ models. We argue that the two programmes have more in common than Kahneman thought, and that their respective methodologies are complementary and mutually informative. As used by many behaviourally-inclined economists, utility maximisation is a flexible modelling strategy for representing considerations that might enter a reasonable person’s decision making, rather than a commitment to the belief that individuals act on preferences that satisfy a priori axioms of normative rationality. The research method of considering one deviation at a time is used in both modelling and experimentation and in both economics and psychology, in ways that promote cumulative advances in scientific knowledge.