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A Psychological Perspective on Economics

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Author Info
Daniel Kahneman

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Abstract

My first exposure to the psychological assumptions of economics was in a report that Bruno Frey wrote on that subject in the early 1970's. Its first or second sentence stated that the agent of economic theory is rational and selfish, and that his tastes do not change. I found this list quite startling, because I had been professionally trained as a psychologist not to believe a word of it. The gap between the assumptions of our disciplines appeared very large indeed. Has the gap been narrowed in the intervening 30 years? A search through some introductory textbooks in economics indicates that if there has been any change, it has not yet filtered down to that level: the same assumptions are still in place as the cornerstones of economic analysis. However, a behavioral approach to economics has emerged in which the assumptions are not held sacrosanct. In the following I comment selectively on the developments with regard to the three assumptions, on both sides of the disciplinary divide.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 2 (May)
Pages: 162-168
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Handle: RePEc:aea:aecrev:v:93:y:2003:i:2:p:162-168

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Oliver Budzinski & Isabel Ruhmer, 2009. "Merger Simulation in Competition Policy: A Survey," Working Papers 82/09, University of Southern Denmark, Department of Environmental and Business Economics. [Downloadable!]
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  2. van de Coevering, Clement & Foster, Daniel & Haunit, Paula & Kennedy, Cathal & Meagher, Sarah & Van den Berg, Jennie, 2006. "Estimating economic and social welfare impacts of pension reform," MPRA Paper 1623, University Library of Munich, Germany. [Downloadable!]
  3. Secchi Davide, 2004. "Corporate Social Responsibility in Europe: Analyzing Business in Transnational Contexts," Economics and Quantitative Methods qf04023, Department of Economics, University of Insubria. [Downloadable!]
  4. Ferraro, Fabrizio & Pfeffer, Jeffrey & Sutton, Robert I., 2003. "Economics Language and Assumptions: How Theories Can Become Self-Fulfilling," Research Papers 1849, Stanford University, Graduate School of Business. [Downloadable!]
  5. Liam Graham & Andrew J. Oswald, 2006. "Hedonic Capital," IZA Discussion Papers 2079, Institute for the Study of Labor (IZA). [Downloadable!]
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  6. Kevin Kniffin, 2009. "Evolutionary perspectives on salary dispersion within firms," Journal of Bioeconomics, Springer, vol. 11(1), pages 23-42, April. [Downloadable!] (restricted)
  7. Joseph R. Blasi & Douglas L. Kruse & Harry M. Markowitz, 2008. "Risk and Lack of Diversification under Employee Ownership and Shared Capitalism," NBER Working Papers 14229, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Easterlin, Richard A. & Angelescu, Laura, 2009. "Happiness and Growth the World Over: Time Series Evidence on the Happiness-Income Paradox," IZA Discussion Papers 4060, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Easterlin, Richard A., 2008. "Lost in Transition: Life Satisfaction on the Road to Capitalism," IZA Discussion Papers 3409, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Richard Kum-yew Lai, 2005. "A Catering Theory of Analyst Bias," Finance 0509004, EconWPA. [Downloadable!]
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  11. Alpo Willman, 2007. "Sequential optimization, front-loaded information, and U.S. consumption," Working Paper Series 765, European Central Bank. [Downloadable!]
  12. Ferraro, Fabrizio & Pfeffer, Jeffrey & Sutton, Robert I., 2003. "Economics language and assumptions: How theories can become self-fulfilling," IESE Research Papers D/530, IESE Business School. [Downloadable!]
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