Thinking - Fast and Slow
Daniel Kahneman
Contributed by Larisa Brooke
Chapter 27

Kahneman introduces this chapter with an illustration of the indifference curve. Accordingly, each curve represents a combination of commodities whose desire is relatively accommodating. In effect, these curves represent combinations that hold the same utility. While the indifference curve is conducive when explaining factors affecting the level of satisfaction, it has failed, as Kahneman explains, to account for the reference point of one’s income. Most individuals cite the status quo as their point of reference. ‘


Kahneman guides the reader through a holistic approach to how one’s reference point affects the choices that one does. In essence, he portrays the possible underlying theory-induced blindness in several economics theories. The author has employed some theories in this chapter on which he points some errors that enables the reader to understand the importance of the past and one’s current situation. While most theories in economics tend to focus on expectations as the main determinant of one’s efforts towards achieving satisfaction, these positions are crucial in establishing the motive to work on making a choice.

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