Human decisions are shaped by mental shortcuts that serve us well in familiar settings and betray us in unfamiliar ones. Kahneman's distinction between System 1 (fast, automatic, pattern-based) and System 2 (slow, deliberate, analytic) frames the rest of the topic: most everyday decisions run on System 1, which is why biases are so persistent. Cognitive biases are systematic deviations from rational choice, while heuristics are the mental shortcuts that produce them. The cognitive reflection test uses three short questions designed to surface System 1 errors when the correct answer requires System 2.
Several biases distort how we evaluate information. Anchoring makes the first number or option unduly shape later judgment; the contrast effect changes how each option is judged by what sits next to it. The framing effect shows that the same information leads to different choices depending on whether it is presented as a gain or a loss, the point of Tversky's Asian disease experiment, where "saving 200 of 600 lives" and "400 will die" produced opposite preferences despite identical outcomes. Loss aversion means losses feel roughly twice as bad as equivalent gains feel good, and the certainty effect makes outcomes seen as certain weigh far more heavily than merely probable ones even when expected values match. Prospect theory (Kahneman and Tversky) models these departures from classical expected utility. Choice architecture, the way options are presented, also shapes decisions without removing freedom: default options are disproportionately chosen (the default effect), and a nudge is a light intervention in that architecture. Libertarian paternalism designs defaults to guide better choices while preserving the freedom to opt out.
Other biases distort our sense of probability and self-knowledge. The availability heuristic makes vivid recent events feel more likely than they are; the representativeness heuristic judges by similarity to a stereotype, often ignoring base rates. The affect heuristic lets current emotion shape risk and benefit judgments, while Damasio's somatic marker hypothesis holds that bodily emotional signals guide decisions, especially under uncertainty. Intuition itself is pattern recognition from accumulated experience: powerful in stable, predictable domains, and notoriously poor in chaotic ones like stock-picking. Confirmation bias favors evidence that supports existing beliefs. Overconfidence is pervasive: subjective certainty routinely exceeds objective accuracy, and the Dunning-Kruger effect shows that low-expertise people often overestimate their judgment while high-expertise people underestimate theirs.
Two further distortions shape intertemporal choice and probability judgment. Hyperbolic discounting heavily discounts future rewards, with steep early decay that produces short-term bias, and present bias overweighting immediate outcomes drives procrastination and overconsumption. The planning fallacy makes us underestimate time and cost of future tasks while overestimating their benefits, an error addressed by reference-class forecasting: anchoring estimates on the distribution of actual outcomes from similar past projects, the outside view, rather than the optimistic inside view. The conjunction fallacy is believing a specific compound event is more probable than a more general single event, while the disjunction fallacy is underestimating the probability that at least one of multiple events occurs. Decision fatigue degrades the quality of decisions as the number of decisions made grows, especially late in the day; countering it means making important decisions early, reducing trivial decisions through defaults, and recovering with rest and food.