Editing Behavioral economics (section)

== History ==
[[File:Adam Smith The Muir portrait.jpg|thumb|140px|[[Adam Smith]], author of ''The Wealth of Nations'' (1776) and ''The Theory of Moral Sentiments'' (1759)]]

Early classical economists included psychological reasoning in much of their writing, though psychology at the time was not a recognized field of study.<ref name=":02">{{Cite book |last1=Camerer |first1=Colin |title=Advances in Behavioral Economics |last2=Loewenstein |first2=George |last3=Rabin |first3=Matthew |publisher=Princeton University Press |year=2004 |isbn=9780691116822 |pages=4–6}}</ref> In ''[[The Theory of Moral Sentiments]],'' Adam Smith wrote on concepts later popularized by modern Behavioral Economic theory, such as [[loss aversion]].<ref name=":02" /> [[Jeremy Bentham]], a [[Utilitarian]] philosopher in the 1700s conceptualized [[utility]] as a product of psychology.<ref name=":02" /> Other economists who incorporated psychological explanations in their works included [[Francis Edgeworth]], [[Vilfredo Pareto]] and [[Irving Fisher]].

A rejection and elimination of psychology from economics in the early 1900s brought on a period defined by a reliance on empiricism.<ref name=":02" /> There was a lack of confidence in [[Hedonism|hedonic]] theories, which saw pursuance of maximum benefit as an essential aspect in understanding human economic behavior.<ref name=":13"/> Hedonic analysis had shown little success in predicting human behavior, leading many to question its viability as a reliable source for prediction.<ref name=":13" />

There was also a fear among economists that the involvement of psychology in shaping economic models was inordinate and a departure from accepted principles.<ref name=":2">{{Cite journal |last1=Hansen |first1=Kristian Bondo |last2=Presskorn-Thygesen |first2=Thomas |date=July 2022 |title=On Some Antecedents of Behavioural Economics |journal=History of the Human Sciences |volume=35 |issue=3–4 |pages=58–83 |doi=10.1177/09526951211000950|s2cid=234860041 }}</ref> They feared that an increased emphasis on psychology would undermine the mathematic components of the field.<ref>{{Cite journal |last1=Brown |first1=Stephen J. |last2=Goetzmann |first2=William N. |last3=Kumar |first3=Alok |date=January 1998 |title=The Dow Theory: William Peter Hamilton's Track Record Reconsidered |journal=The Journal of Finance |volume=53 |issue=4 |pages=1311–1333 |doi=10.1111/0022-1082.00054 |jstor=117403 |doi-access=free }}</ref><ref name=":3">{{Cite journal |last=Boyd |first=Richard |date=Summer 2020 |title=The Early Modern Origins of Behavioral Economics |journal=Social Philosophy & Policy |publisher=Oxford: Cambridge University Press |volume=37 |issue=1 |pages=30–54 |doi=10.1017/S0265052520000035|s2cid=230794629 }}</ref>

To boost the ability of economics to predict accurately, economists started looking to tangible phenomena rather than theories based on human psychology.<ref name=":13" /> Psychology was seen as unreliable to many of these economists as it was a new field, not regarded as sufficiently scientific.<ref name=":02" /> Though a number of scholars expressed concern towards the [[positivism]] within economics, models of study dependent on psychological insights became rare.<ref name=":02" /> Economists instead conceptualized humans as purely rational and self-interested decision makers, illustrated in the concept of ''[[homo economicus]].''<ref name=":3" />

The resurgence of psychology within economics, which facilitated the expansion of behavioral economics, has been linked to the [[cognitive revolution]].<ref>{{Cite web |title=What is behavioral economics? {{!}} University of Chicago News |url=https://news.uchicago.edu/explainer/what-is-behavioral-economics |access-date=2024-02-12 |website=news.uchicago.edu |language=en}}</ref><ref>{{Cite journal |last=Camerer |first=Colin |date=1999-09-14 |title=Behavioral economics: Reunifying psychology and economics |journal=Proceedings of the National Academy of Sciences of the United States of America |volume=96 |issue=19 |pages=10575–10577 |doi=10.1073/pnas.96.19.10575 |doi-access=free |issn=0027-8424 |pmid=10485865|pmc=33745 |bibcode=1999PNAS...9610575C }}</ref> In the 1960s, [[cognitive psychology]] began to shed more light on the brain as an information processing device (in contrast to [[Behaviorism|behaviorist]] models). Psychologists in this field, such as Ward Edwards,<ref name="ward">{{cite web|title=Ward Edward Papers|publisher=Archival Collections|url=http://www.usc.edu/libraries/archives/arc/libraries/collections/records/427home.html|access-date=2008-04-25|archive-url=https://web.archive.org/web/20080416235453/http://www.usc.edu/libraries/archives/arc/libraries/collections/records/427home.html|archive-date=2008-04-16|url-status=dead}}</ref> [[Amos Tversky]] and [[Daniel Kahneman]] began to compare their cognitive models of decision-making under risk and uncertainty to economic models of rational behavior. These developments spurred economists to reconsider how psychology could be applied to economic models and theories.<ref name=":02" /> Concurrently, the [[Expected utility hypothesis]] and [[discounted utility]] models began to gain acceptance. In challenging the accuracy of generic utility, these concepts established a practice foundational in behavioral economics: Building on standard models by applying psychological knowledge.<ref name=":13" />

[[Mathematical psychology]] reflects a long-standing interest in preference transitivity and the measurement of utility.{{sfn|Luce|2000}}

=== Development of Behavioral Economics ===
In 2017, Niels Geiger, a lecturer in economics at the [[University of Hohenheim]] conducted an investigation into the proliferation of behavioral economics.<ref name=":82">{{Cite journal |last=Geiger |first=Niels |date=2017 |title=The Rise of Behavioral Economics: A Quantitative Assessment |url=https://www.cambridge.org/core/product/identifier/S0145553217000177/type/journal_article |journal=Social Science History |language=en |volume=41 |issue=3 |pages=555–583 |doi=10.1017/ssh.2017.17 |s2cid=56373713 |issn=0145-5532}}</ref> Geiger's research looked at studies that had quantified the frequency of references to terms specific to behavioral economics, and how often influential papers in behavioral economics were cited in journals on economics.<ref name=":82"/> The quantitative study found that there was a significant spread in behavioral economics after Kahneman and Tversky's work in the 1990s and into the 2000s.<ref name=":82"/>
{| class="wikitable"
|+Citation Frequency in Economic Journals for Kahneman and Tversky's Studies on Behavioral Economics by 5-Year Periods<ref name=":82"/>
!
!1979 Paper
!1992 Paper
!1974 Paper
!1981 Paper
!1986 Paper
|-
|1974-78
|0
|0
|1
|0
|0
|-
|1979-83
|1
|0
|4
|3
|0
|-
|1984-88
|7
|0
|0
|1
|0
|-
|1989-93
|19
|1
|2
|6
|3
|-
|1993-98
|37
|16
|12
|7
|6
|-
|1999-2003
|51
|20
|5
|15
|11
|-
|2004-08
|80
|48
|18
|15
|16
|-
|2009-13
|161
|110
|59
|38
|19
|-
|Total Citations
|356
|195
|101
|85
|55
|}