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LOSS_AVERSE

                                                May 12, 2014
                                                May 19, 2014

The material later in Kahneman's "Thinking,
Fast and Slow" (e.g. ch 28 "Bad Events"),              FAST_SLOW_AND_SLOWER
discusses "loss aversion", a behavioral
phenomena Kahneman and company helped document--

His attitude toward this is interesting:

  "The concept of loss aversion is certainly
  the most significant contribution of psychology
  to behavioral economics.  This is odd, because
  the idea that people evaluate many outcomes as
  gains and loses, and that loses looms larger
  than gains, suprises no one."  -- p.300
                                                           Also see
To my eye, Kahneman's attitude                             p 308.
toward risk aversion varies
strangely.  In places he conceeds
that it's irrational (or at least,
problematic), but in others I think
he goes beyond just accepting it as
a fact of human behavior, he often
appears to endorse it--

Any deviation from "risk neutral"
reasoning has always struck me as a
problem, a human failing that we          It is true that many economists--
need to learn to compensate for.          and worse, libertarians-- often
The idea of the perfectly rational        seem confused about whether
decision-maker always remains an          "rational actors" are
ideal, even though we need to             modeling approximations or
understand that actual humans don't       something that really exists.
often make it there.
                                                         MADNESS
   Kahneman's many examples of
   loss aversion make me wonder if
   I've called this one right--          The ideal for me,
   you're likely to walk away from       is a risk-neutral
   Kahneman with a feeling that          summation of potential
   this is simply "normal", rather       losses and gains
   than a huge deviation from            weighted by probability
   rationality.                          of occurence.

                                         In retrospect, I seized
     FUKUSHIMA_EVACUATION                on this approach intuitively
                                         in my twenties without a
                                         lot of reflection.

                                         Kahneman refers to some classic
                                         work by Von Neuman and company
                                         in 1943 that essentially proves
                                         that "risk neutral"
                                         decision-making is the only
                                         thing that works...  (or at
                                         least is the only thing that's
                                         not evidently
                                         self-contradictory).


                                         (( And, what about Naomi?
                                            I mean, Bernoulli. ))





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