Kahneman has done a huge amount of work on cognitive biases – the quirks of mind that make us deviate from rationality, sometimes in quite surprising and interesting ways.
For example, with his colleague Amos Tversky, he discovered the availability heuristic, which is the process by which we tend to judge an event as more likely to happen in the future the more easily it can be brought to mind.
This is why we vastly overestimate the chances of vividly spectacular but unlikely things like terrorism, but underestimate the mundane but consistently lethal things like driving.
Kahneman has been involved in identifying many of these sorts of biases, and cleverly, applying them to economic decision making to inform economic models of financial behaviour.
As a result, experimental psychology is now a key part of economics to understand how people actually behave as opposed to earlier models which assumed that people will always act more-or-less rationally to maximise their profits.
The Edge ‘masterclass’ is quite a comprehensive guide to his work and covers work which has been influential in many areas of psychology.
Link to Edge Daniel Kahneman ‘masterclass’.