Psychologists Daniel Kahneman and Amos Tversky’s groundbreaking collaboration in 1974 led to the creation of behavioural economics and today serves as a model for academics. Kahneman and Tversky described economic agents as humans prone to heuristics, biases and frailties. The two, however, succumbed to their own inherently human failings and the friendship was dissolved. In light of Kahneman’s recent death, Smita Roy Trivedi reflects on what made this partnership special.
The collaboration between Daniel Kahneman and Amos Tversky, the psychologist duo who trespassed into economics, pioneered a new understanding of the human mind and led to the birth of behavioural economics, remains one of the most enigmatic of our times. Kahneman’s Nobel Prize was awarded for the work that he produced with Tversky during a period of “intense collaboration”, which, however, did not sustain itself and “tapered off”, a “painful surprise”. Theirs was a collaboration that brought to the forefront humans as economic agents with heuristics, biases, and frailties. But they failed to transcend their own inherently human failings and the friendship was dissolved.
Two months after Kahneman’s death, we celebrate his contribution spanning across the disciplines of psychology and economics. It is an opportune moment to look at his work with Tversky, who died in 1996. The two changed economics forever. Today, as ideas across multiple disciplines percolate naturally through advances in technology, and breakthroughs in research are sustained by collaboration between academics and industry, we take a closer look at the modality of this illustrious collaboration. However, before I start, a word on their influence on economics as a discipline is required.
In 1974, Tversky and Kahneman published the paper ‘Judgment under Uncertainty: Heuristics and Biases’, which has been cited over 54000 times, a testimony to its relevance and popularity. It is hardly an overstatement to say that this work into the biases inherent in human behaviour led to the foundation of behavioural economics, as we know it now. Richard Thaler, in his book “Misbehaving: The Making of Behavioural Economics”, asserted that after reading the article, his ‘life had changed forever”. Since then, many economists have had the same reaction to the paper, as undoubtedly the article forces you to question the basic assumptions on which you have built your economic thinking.
The genesis of this paper and the beginning of their collaboration was, however, anything but collegial. Kahneman had invited Tversky to present the latest research on judgement and decision-making in a graduate seminar. Tversky, departing from his usual practice, presented not his own research but the work of his mentor Ward Edwards showing that people are “conservative Bayesians”. This implied that people “almost always adjust their confidence interval in the proper direction, but rarely far enough”.
Kahneman felt that this observation did not represent the everyday behaviour among humans prone to “jumping into conclusions”. In the arguments that followed, Amos was “pushed… into the wall”, a rarity for the brilliant academic. It was a surprise to Kahneman that Tversky actually considered his criticism, and it created the foundation for their discussions, finally culminating in the 1974 paper on heuristics and biases.
Their subsequent work, the development of prospect theory as an alternative to the neoclassical expected utility theory, brought forth ideas like loss aversion and diminishing sensitivity to gains and losses, which became key to a better understanding of financial decision-making. Behavioural economics has since then come a long way, including the incorporation of the departure from rationality in public economics. And all this stems from the work of Kahneman and Tversky to understand the human mind better.
Their collaboration emanated from a host of factors. First, both realised the work they were doing jointly was better than what they did individually. Though a necessary condition for collaborations to work, this is never a sufficient condition to hold them together or make them influential. Joint work needs both nurturing and hard labour. To say that their papers were a labour of love would be an understatement. “Progress might be slow”, but each draft was an improvement. The 1974 paper, written sometime during 1972-73, took a year, as they did “little but work on one article… as if the precise choice of every word were a matter of great moment”.
Second, the precursor to good collaboration is “friendship”, a sacrosanct space of mutual trust, respect and admiration. The sharing of academic ideas does not sustain itself in a vacuum, and each of them got to know the other’s mind “almost as well as our own”. Their success came from the ability to “elaborate each other’s nascent thoughts”. Ideas are nebulous. It takes a rare collaborator to understand those embryonic constructs and a rarer collaboration yet to bring it to its logical conclusion. Most academics find it difficult to overcome their ego to express their half-formed ideas. In their best years of collaboration, this concern was completely absent for Tversky and Kahneman and they reached “mutual trust and complete lack of defensiveness”. However, the magic of collaboration failed if a third person joined in, as a threesome made them “competitive”.
What works for a collaboration can work against it too. For the initial period of work, the two “tossed a coin” to decide on the “order of authorship”. The beauty lay in the intermingling of individual innovative ideas that led to the creation of path-breaking theoretical constructs. Kahneman said they didn’t know who did what: “it was beautiful, not knowing”.
However, as much as the integration of individual ideas can craft pioneering research, the mingling makes it difficult to assign individual credit: the credit that would lead to recognition and accolades. Since it is ideas that yield academic coinage, if the ones you helped nurture are not ‘jointly’ recognised, it can throttle the most formidable of collaborations.
Kahneman felt that the ‘public perception of the collaboration’ was far from its reality, and that he clearly lost out, as the rewards of academic success were such that ‘one person gets a lot of it’, in this case Tversky. Unfortunately, even the “growing crowd of common enemies” failed to unite them. So, in the years after the 1980s, the collaboration “tapered off”, with attempts to “revive the magic” in vain. Their work paid the price of the demise of their friendship. Kahneman puts it so in his Nobel autobiographical lecture:
“We had completely failed to appreciate how critically our successful interaction had depended on our being together at the birth of every significant idea, on our rejection of any formal division of labour, and on infinite patience ….. We struggled for years to revive the magic we had lost, but in vain”.
The pain in those words is obvious. Only when you have worked in such a collaboration, do you know its joy, and only when you lose it, its value. As academics who collaborate by choice or default, let us then take a pause to celebrate the collaboration that led to the birth of a new school of thought. The coming together of two of the finest minds of our times and their tumultuous drifting apart; the legendary, resilient yet nebulous friendship is perhaps one of the most poignant stories ever told. Academic collaboration, in its most creative form, is like fireflies in the dark: only a few have the “spark” to light up your mind, and it is the pursuit of that illusive spark that defines us.
- Authors’ disclaimer: The views and opinions expressed in the article are my own and do not, in any way, reflect those of the institutes I represent..
- This blog post represents the views of the author(s), not the position of LSE Business Review or the London School of Economics and Political Science.
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