HEADLINE: Challenging Prospect Theory: Increasing Sensitivity to Loss in Human Behavior GUEST NAME: Tim Kane SUMMARY: Professor Tim Kane questions Kahneman and Tversky's Prospect Theory, presenting experiments that suggest humans exhibit increasing sensi
The John Batchelor Show
John Batchelor
4.5 • 2.8K Ratings
🗓️ 18 September 2025
⏱️ 12 minutes
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Summary
HEADLINE: Challenging Prospect Theory: Increasing Sensitivity to Loss in Human Behavior
GUEST NAME: Tim Kane
SUMMARY: Professor Tim Kane questions Kahneman and Tversky's Prospect Theory, presenting experiments that suggest humans exhibit increasing sensitivity to loss, rather than diminishing, impacting our understanding of complex rationality beyond financial gambles. Professor Tim Kane challenges Kahneman and Tversky's Prospect Theory, arguing that while losses hurt more than gains, people show increasing sensitivity to successive losses, not diminishing sensitivity. His chocolate experiment demonstrated higher demands to part with each subsequent piece, suggesting a "complex rationality" that differs in non-financial contexts from pure monetary gambles.
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| 0:23.7 | This is CBSI on the world. I'm John Batchel. I welcome Professor Tim Cain of the University |
| 0:29.3 | of Austin at Austin, Texas to take us by the hand and lead us to prospect theory. |
| 0:36.9 | This is a paper by Daniel Connaman and Amos Tversky, |
| 0:42.1 | published in the 1979 edition of Econometrica. It's about things we've done our whole lives, |
| 0:49.7 | take choices between sure things and gambles. But, Professor, a very good evening to you, rather than |
| 0:57.0 | give my crude version of prospect theory, how is it stated by the eminent economist, your |
| 1:05.0 | colleagues, Mr. Connman and Mr. Tversky. Good evening to you. Thanks, John. Great to see you, hear you, and be with you. |
| 1:13.2 | Daniel Kahneman, a lot of people might know him from his book, Thinking Fast and Slow. |
| 1:18.8 | For those who aren't economists and don't hang on the news of the Nobel Prize winners, |
| 1:23.9 | he's one of the more famous Nobel Prize winners, won in 2002. And his colleague, |
| 1:31.4 | Amos Tversky, would also have won it if he hadn't passed away. So they don't give that |
| 1:35.1 | award posthumously. Anyway, those two guys really shook up economics, which had this framework of |
| 1:42.5 | rational economic man, making, you know, |
| 1:46.1 | calculating choices. And they did some experiments and said, look, not all of the way that |
| 1:51.3 | people actually behave is aligning with your technical models. So so was born behavioral economics. |
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