Thinking - Fast and Slow
Daniel Kahneman
Contributed by Larisa Brooke
Chapter 31

The section outlines an analysis of the irrationality portrayed by people concerning risk policies. People tend to be risk averse with anticipated gain, and the appetite for risk reduces where there is a loss. The human rationality is a limited judgment tool since it lacks consistency in the evaluation of a case at hand. The chapter has outlined Samuelson’s issue which is an intuition that if a person undertakes a similar risk repeatedly, they increase the chances of succeeding. An exaggerated fallacy in planning arises, and an excess of anticipated loss probability forces enables firms to settle a reasonable equilibrium.


People tend to be indifferent concerning risk. Some tend to have a higher appetite for risk while others tend to be risk averters. Kahneman in the chapter was subjective and the research relied upon was limited. Although under normal circumstances people would respond similarly to his respondent, many would not come due to the level of risk each person is willing to absorb at a given time. It is a limited conclusion to categorize people under specific categories since people are indifferent concerning risk matters.

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