# Introduction

o the current foundations of management sciences we seem to have no qualms in ascribing the description of quasi-absolute. This characterization of the field's foundations is occasionally identified by researchers as a lacuna of sorts, but for working managers this concern-concern indeed if they understood it as-often did not merit immediate or serious consideration in their scheme of things for long. Consequentially, case studies and data collection became widespread and research of the fundamental kind-the kind that constitutes & contributes to scientific theory-building-took a backseat. Furthermore, the other fore of this gap grew in the form of researchers rarely attempting to situate increasing piles of meaningful data within the ambit of a fundamental theory; and insofar as they intended to do that, they did not know where to look-maybe because most times there was nowhere to look. As an upshot of this tendency, construction of models was as far as most research in the field reached. But alas, models are no theory. Every so often management science has witnessed a definitive change in this picture characterized by a visible shift in attention from case studies to theory-building. And Daniel Kahneman is one of those who exemplify this long-pending shift. And it is from this more crucial standpoint that we view and appreciate Kahneman's latest offering Thinking, Fast and Slow.

Thus, what stands out prominently in Thinking, Fast and Slow is Kahneman's attempt at theory-building within which to construct explanatory accounts of his revolutionary findings on decision making. This is refreshing and crucial for the field as it calls itself a scientific enterprise. Of course, Thinking, Fast and Slow presents readers with a rich canvas of the revolutionary joint work of Kahneman with Tversky that fetched the former the 2002 Economic Sciences Nobel. When reviewing Thinking, Fast and Slow, therefore, it would be tendentious of many to focus on the findings of Kahneman's work on decision making-after all, they forced economists to revise their longstanding notion of how people make their decisions. However, the real gem in Kahneman's Thinking, Fast and Slow is his attempt at theory-building to account for his empirical findings on decision making, by espousing the so called dual-process model of human information processing. And Kahneman wastes no time in according the model's importance-he discusses the model right in the beginning of the book.

Kahneman advocates that our cognitive apparatus comprises of two main parts viz. System 1 and System 2. Whereas System 1 is supposed to refer to that aspect of our mental apparatus which is clearly dominated by intuition and hunch, System 2 is supposed to refer to the mental apparatus that employs logical, algorithmic reasoning or simply, rational thinking. System 1 is largely a prerogative of the subliminal realm of mind's information processing, and is therefore characterized by automaticity, swiftness, less executive control and less mental workload. System 2 is the work of the conscious realm of information processing, and is therefore characterized by deliberate efforts, relative slowness, comparatively more mental workload, and is largely under the control of executive function/control.

People's decision making biases, a theoretical construct to explain them and Prospect Theory to model decision making behaviors-these strands together form the hallmark of Kahneman's book. From Bernoulli utility function to Expected Utility to Kahneman and Tversky's Prospect Theory-the enterprise of Decision Making has come a long way in our understanding of how people make decisions and Thinking, Fast and Slow is arguably the most significant landmark in this understanding. The defining feature of Kahneman and Tversky's Prospect Theory is the value function: Prospect Theory, Expected Utility Theory's utility function is replaced by a more correct value function and knowledge about how it responds to the reference point.

Kahneman's 1979 Econometrica article-his joint work with Tversky on Prospect Theory-remains to this date the most cited article of the prestigious journal.

Thinking, Fast and Slow is an awe-inspiring work that marks a reasoned departure from the orthodox assumptions of economic science. Economic theorists portrayed humans as Bayesian estimators who invariably work at maximizing expected utilities. From Adam Smith to Leonard Savage, and for close to two hundred years, there was a general consensus that people act as rational agents (forming the Rational Agent Theory in economics). This was, arguably, an empirically uninformed consensus. Nevertheless, this view prevailed until Herbert Simon seminal work indicated the unavoidable constraints on human decision making, which marred traditional economists' idealist expectation of people's decision making tendencies. Kahneman and Tversky's work presented in this book is an empirical testimony to Herbert Simon's theoretical postulation of bounded rationality. For instance, when presented with two competing economic scenarios-one certain and the other uncertain-people consistently choose the certain outcome showing aversion for risky alternative. This is the phenomenon of "risk aversion", which is anchored in "loss aversion" behavior-people's consistent tendency to weigh negatives of losses more than the positives from gains. Kahneman discusses this whole set of decision making biases, which include "loss aversion", "risk aversion", "sunk-cost effect", "endowment effect", "base-rate fallacy", "duration neglect", heuristics such as "anchoring heuristic" and availability heuristic. These cognitive biases in decision making share a common property: they are all deemed irrational decisions in light of economic science's orthodox rational agent hypothesis. The book suggests "heuristics" as the key tool people employ in making decisions. This suggestion is actually twofold-people tend to use heuristics (due mainly to bounded rationality) which in turn lead to a wide range of cognitive biases while making judgments or weighing tradeoffs between economic decision alternatives. A note of caution is in order here: saying that people have propensity for using heuristics is not tantamount to saying that they are biologically predisposed to rely on heuristics-far from it. So, what bearing does it have on whether or not Kahneman believes that people's decision making behavior under uncertainty is fundamentally irrational, or, if on the contrary he could perhaps be understood as inclined toward believing that if people were somehow trained/habituated toward becoming ideal Bayesian estimators and in the absence of the constraints that bound our rationality-cognitive biases in decision making could be avoided. This is a highly moot and equivocal point both for the enterprise of decision sciences as well as for Kahneman.

Thanks to Kahneman, these are exciting times for decision sciences. The profundity of Kahneman's work will only increase with time.
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