Must-read: Amos Tversky and Daniel Kahneman (1974): “Judgment under Uncertainty: Heuristics and Biases”

Must-Read: Amos Tversky and Daniel Kahneman (1974): Judgment under Uncertainty: Heuristics and Biases: “Many decisions are based on beliefs concerning the likelihood of future events…

…These beliefs are usually expressed in statements such as ‘I think that…’, ‘the chances are…’, ‘it is unlikely that…’, and so forth. Occasionally, beliefs concerning uncertain events are expressed in numerical form as odds or subjective probabilities. What determines such beliefs? How do people assess the probability of an uncertain event or he value of an uncertain quantity?… People rely on a limited number of heuristic principles which reduce the complex tasks of assessing probabilities and predicting values to simpler judgmental operations. In general, these heuristics are quite useful, but sometimes they lead to severe and systematic errors…