What Are The Four Heuristics Of Decision Making

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Summary
In Dan Kahneman’s an Israeli-American psychologist notable for his work on behavioural economics, stated in his book, “Thinking Fast and Slow,” that the brain has two systems. These systems are referred to as System 1 “The Fast Thinker” and System 2, “The Slow Thinker”. System 1 operates automatically, intuitively, involuntary, and with little or no effort. System 2 however, operates slowly. It requires slowing down to deliberate, solve problems, reason, complete complex computations, focus, concentrate, consider other data, and avoid jumping to quick conclusions. In other words, it allocates attention to the effortful mental activities that demand it.
He also states that these systems are affected by what is referred to as heuristics.
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First on the list is Substitution, this heuristic is responsible us replacing a perplexing problem, question, or decision, with a substitute, simpler question. Instead of estimating the probability of a certain complex outcome we rely on an estimate of another, less complex outcome.
Second, we have The Law of Small Numbers. This heuristic usually comes into play because our brains have a difficult time with statistics. Small samples are more prone to extreme outcomes than large samples, but we tend to lend the outcomes of small samples more credit than statistics warrant. We are more impressed with the outcome of small samples but shouldn’t be. Small samples are not representative of large samples. Large samples are more precise.
Then there is Overlooking Statistics. If we are given statistical data and an individual story that explains things we tend to go with the story rather than statistics. We favour stories with explanatory power over mere
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