![]() In The Theory of Moral Sentiments, Adam Smith wrote on concepts later popularized by modern Behavioral Economic theory, such as loss aversion. SmithĪdam Smith, author of The Wealth of Nations (1776) and The Theory of Moral Sentiments (1759)Įarly Neoclassical economists included psychological reasoning in much of their writing, though psychology at the time was not a recognized field of study. 9.1.3 2002 - Daniel Kahneman and Vernon L.9.1.2 2001 - George Akerlof, Michael Spence, and Joseph Stiglitz.1.1 Development of Behavioral Economics.Behavioral economics is still growing as a field, being used increasingly in research and in teaching. The status of behavioral economics as a subfield of economics is a fairly recent development the breakthroughs that laid the foundation for it were published through the last three decades of the 20th century. The concepts used in behavioral economics today can be traced back to 18th-century economists, such as Adam Smith, who deliberated how the economic behavior of individuals could be influenced by their desires. The study of behavioral economics includes how market decisions are made and the mechanisms that drive public opinion. Behavioral models typically integrate insights from psychology, neuroscience and microeconomic theory. īehavioral economics is primarily concerned with the bounds of rationality of economic agents. The behavioral economics concept on "nudging" people's behavior and actions is often illustrated with this urinal with a housefly image embossed in the enamel the image "nudges" users into improving their aim, which lowers cleaning costs.īehavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals or institutions, such as how those decisions vary from those implied by classical economic theory. ![]()
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