Table of Contents

Handbook on the History of Economic Analysis Volume III

Handbook on the History of Economic Analysis Volume III

Developments in Major Fields of Economics

Edited by Gilbert Faccarello and Heinz D. Kurz

Volume III contains entries on the development of major fields in economics from the inception of systematic analysis until modern times. The reader is provided with succinct summary accounts of the main problems, the methods used to address them and the results obtained across time. The emphasis is on both the continuity and the major changes that have occurred in the economic analysis of problematic issues such as economic growth, income distribution, employment, inflation, business cycles and financial instability. Each Handbook can be read individually and acts as a self-contained volume in its own right. It can be purchased separately or as part of a three-volume set.

Chapter 3: Behavioural and cognitive economics

Salvatore Rizzello and Anna Spada

Subjects: economics and finance, history of economic thought


Behavioural economics and cognitive economics are two research programmes that emerged during the 1980s and 1990s, respectively. The adjective “behavioural” is introduced to stress the relevance recognized by behavioural economists to actual human behaviours, in contrast to traditional economics, criticized for employing unrealistic assumptions as a starting point for its models. As a consequence, behavioural economics attributes a large relevance to psychology. The adjective “cognitive” is introduced to stress a particular attention for the results of cognitive psychology and social cognition. Both behavioural and cognitive economics have their roots in the 1950s. The main references are Herbert Simon, Maurice Allais, and George Katona. They innovatively contributed to the methodological perspective, with empirical and experimental works. Their work was also important for its theoretical perspective, with new conceptual tools; particularly, the ideas of bounded rationality (Simon 1947), the inconsistency of choices (Allais 1953), and the relevance of perception, expectations and motivations (Katona 1951). In the period until the end of the 1970s, these conceptual tools were developed, generating the ideas of procedural rationality and satisficing (Simon 1976), and many studies on the nature and kinds of psychological bias, and on perception and expectations (Kahneman and Tversky 1979). During the 1980s, several convergences allowed a systematization of these contributions, and behavioural economics emerged as a new research programme (Earl 1988; Gilad and Kaish 1986; Gilad et al. 1984). Successively, during the 1990s, some economists began to use the expression “cognitive economics” (Bourgine and Walliser 1992; McCain 1992; North 1996; Paquet 1998; Rizzello 1997; Viale 1997). The label “cognitive economics” is often used in the literature as a synonymous expression for behavioural economics. Although there are important differences between to the concepts, there are also a few common points: some shared references in the literature, and in particular to Simon’s work; the importance given to psychology; the criticism of neoclassical economics; and the use of the experimental method.

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