Here is the transcript and audio, a rollicking time was had by all. We covered what you would expect us to have covered. Here is one bit:
COWEN: And that people want to maximize their overall sense of how their life has gone — do you think that is ultimately Darwinian roots? Why is that the equilibrium? Happiness feels good, right?
KAHNEMAN: Yeah, happiness feels good in the moment. But it’s in the moment. What you’re left with are your memories. And that’s a very striking thing — that memories stay with you, and the reality of life is gone in an instant. So memory has a disproportionate weight because it’s with us. It stays with us. It’s the only thing we get to keep.
COWEN: If you think of your own life, have you maximized happiness or the overall sense of how your life has gone?
COWEN: Neither. Citations?
And on his new project:
KAHNEMAN: I’ll tell you where the experiment from which my current fascination with noise arose. I was working with an insurance company, and we did a very standard experiment. They constructed cases, very routine, standard cases. Expensive cases — we’re not talking of insuring cars. We’re talking of insuring financial firms for risk of fraud.
So you have people who are specialists in this. This is what they do. Cases were constructed completely realistically, the kind of thing that people encounter every day. You have 50 people reading a case and putting a dollar value on it.
I could ask you, and I asked the executives in the firm, and it’s a number that just about everybody agrees. Suppose you take two people at random, two underwriters at random. You average the premium they set, you take the difference between them, and you divide the difference by the average.
By what percentage do people differ? Well, would you expect people to differ? And there is a common answer that you find, when I just talk to people and ask them, or the executives had the same answer. It’s somewhere around 10 percent. That’s what people expect to see in a well-run firm.
Now, what we found was 50 percent, 5–0, which, by the way, means that those underwriters were absolutely wasting their time, in the sense of assessing risk. So that’s noise, and you find variability across individuals, which is not supposed to exist.
I enjoyed this particular exchange:
COWEN: Do you think of low intelligence as yet a third independent source of error? Or is that somehow subsumed in bias and noise?
KAHNEMAN: You mean plain stupidity?
COWEN: In some cases.
COWEN: A society such as Argentina that relies so heavily on psychoanalysis — as a psychologist, do you see that as bias? Is it a placebo? Is there a placebo effect in psychoanalysis?
KAHNEMAN: You seem to attribute . . . You seem to think that I think of bias all the time.
COWEN: I can’t imagine why. That’s my bias.
KAHNEMAN: It’s like thinking of sex all the time. I really don’t think of bias that much.
COWEN: Some questions about psychologists outside of what you’ve worked on, but maybe related — Freud. What do you think of Freud’s body of work? And has it influenced you at all?
Definitely recommended, and you will find cameo appearances by Michael Nielsen and Daniel Gross.