Review of the Literature

This chapter reviews separately the literatures on choice and price theory, with its emphasis on utility and profit maximization; asset pricing, focused on returns and risk; and growth theory, which largely ignores individual choices and prices, financial structure and expectations. The chapter evaluates previous partial attempts at integration but shows how these either ignore sentiment or lack unifying microfoundations. The final section draws on behavioral economics, neuroeconomics, and affective science to underscore how sentiment and cognition co-determine expectations under uncertainty. It highlights how emotional orientation shapes rational expectations formation, risk perceptions, and utility evaluation. Collectively, these reviews underscore the need for a unified theory that endogenizes sentiment, links portfolio allocation to utility, and integrates growth and macro-financial dynamics. This is the space SAGE aims to occupy, offering a coherent and tractable framework that builds upon—but moves beyond—these fragmented strands.