BY LISA TREI
Daniel Kahneman, a psychology professor at Princeton who shared this year's Nobel Memorial Prize in Economic Sciences with Vernon Smith of George Mason University, did his award-winning research with Amos Tversky, a Stanford psychology professor who died in 1996.
"The prize ... is quite explicitly for joint work, but unfortunately there is no posthumous prize," Kahneman told Stanford Report.
Kahneman is the second psychologist to win economics' highest award. The Nobel Foundation commended him "for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty."
Working with Tversky, Kahneman pioneered the field of behavioral economics. In developing their so-called "prospect theory," the psychologists argued that people are not as calculating as economic models assume. Instead, they said, people repeatedly make errors in judgment that can be predicted and categorized. A 1979 paper they wrote on the subject in Econometrica is one of the most widely cited papers in economics.
Tversky's widow, Barbara, a Stanford psychology professor, said her husband and Kahneman started working together at Hebrew University in the late 1960s. "It continued throughout their lifetime," she said. "It was an amazing synergistic collaboration. They spent hours talking on the phone every week. They were either in my living room or [Kahneman's] living room. They wrote every word together. It was a real intellectual high to watch them."
Barbara Tversky said the work of the two Israeli-born psychologists "shook the foundation of economics" because it called into question the assumption of a "homo œconomicus" motivated by self-interest and capable of rational decision-making. "It spawned a new field of economics," she said. The study of law, statistics, political science and philosophy also have been influenced by the two men's work, she added.
Kenneth Arrow, economics professor emeritus, said many economists at first rejected the psychologists' ideas. "They said, 'These are experiments -- what do they have to do with real life?'" he said. However, Arrow continued, how human behavior affects the stock market has shown the work to be both useful and correct. "It is very, very important in the field," he said. "How it's fully assimilated remains to be seen."
Tversky died from metastatic melanoma when he was 59. The
memorial resolution presented to the Faculty Senate noted: "Amos'
contributions to the social sciences, and to Stanford, were
monumental and will continue to make their influence felt for years
to come." The resolution singled out Tversky and Kahneman's
influence on economics as "likely to be most lasting and
Stanford Report, October 16, 2002