Michael Lewis seized the opportunity to record the critical stages in the evolution of psychology and economics as a science. His book, The Undoing Project—A Friendship That Changed Our Minds,1 culminates with the following citation:
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2002 was divided equally between Daniel Kahneman “for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty” and Vernon L. Smith “for having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms.”2
By the standards of the physical sciences, psychology and economics are just now developing scientific tools. These are qualitatively similar to the physics and chemistry tools developed by Robert Boyle in the 1600s and Antoine Lavoisier and Robert Hooke in the 1700s, among many others.
Today’s hard sciences are built around measurements that were developed over centuries. Biology is quickly coming up to speed with chemistry and physics, where one can make quantitative predictions of properties that hopefully lead to the efficient design and production of items essential to our lives—e.g., food, drugs, shelter and transportation.
Lewis starts the book by describing the impact of metrology on sports, including baseball and basketball. He builds off his book, Moneyball: The Art of Winning an Unfair Game, to show that breaking down macro performance measures into many metrics provided the granularity that made inter-individual comparisons more understandable and useful. The quantitative data provided useful predictions of future performance. This information proved valuable in drafting players for team sports. Word spread quickly, and many, perhaps all, teams use it to some extent.
The Undoing Project describes the attempts of the two main characters, Amos Tversky and Danny Kahneman, to develop tools to quantitatively measure human behavior, particularly in economics and psychology. They created test scenarios for presentation to test cohorts. The scenarios were carefully designed to explore various factors in decision-making processes, and the results were tabulated and compared quantitatively. The process was repeated to improve granularity.
Economists were skeptical of the approach: they had a market model and assumed rational behavior, e.g.: If A is preferred to B, and B is preferred to C, then A will be preferred to C. This is called transitivity. However, transitivity sometimes fails to be predictive when tested on humans making choices.
Amos and Danny spent countless hours evolving, testing and revising scenarios exploring human thought. They explained how the lack of useful metrics makes it difficult to review and revise accepted dogma, particularly from those who have earned respect for their dogma honed over decades.
As I read on, I really began to appreciate the value of advances in metrology in chemistry and physics. If a new hypothesis is proposed, a few experiments seem to be able to evaluate its merits. Chemistry fads come frequently, some lasting a decade or two and some longer. But we have the quantitative tools to support the critical examination. Corresponding psychology and economics tools are clearly needed. Economic and psychological theories seem to be more closely associated with the individual, which personalizes the critical review.
Without quantitative metrology, one can simply take numerous ideas and stitch them together to form a story. Once formed, the story is very hard to dispel. I’ve listened to lectures describing some unexpected outcome, where the speaker gives a convoluted explanation and defends it as “the only thing he can think of.” This is far from convincing; indeed, it is a danger sign. According to Lewis, “people accept any explanation as long as it fits the facts.1
I recommend The Undoing Project for STEM professionals. Readers will come to appreciate the difficulty in designing meaningful experiments and gathering information in psychology and economics. The Nobel Selection Committee for the 2002 prize deserves special credit for recognizing Professors Kahneman and Smith for their outstanding achievements in developing new metrology of psychology and economics.
References
- Lewis, M. The Undoing Project—A Friendship That Changed Our Minds; W.W. Norton & Co., New York, N.Y., 2017.
- http://www.nobelprize.org/nobel_prizes/economicsciences/ laureates/2002/
Robert L. Stevenson, Ph.D., is Editor Emeritus, American Laboratory/Labcompare; e-mail: [email protected].