Edited by John B. Davis and D. Wade Hands
Chapter 2: Behavioral Economics
2 Behavioral economics Floris Heukelom 2.1 INTRODUCTION Behavior as a concept encapsulating all acts of the human being – and, more controversially, of the animal being – originates in the United States of the early twentieth century (Danziger, 1997). Subsequently, this new concept of behavior provided the basis for the label of the new approach to psychology baptized ‘behaviorism’ (Mills, 1998). Behaviorism in its strictest sense is a scientific program commenced and developed by John Broadus Watson, Burrhus Frederick Skinner and others, which reigned psychology in the 1920s and 1930s. In addition, behaviorism forms part of a broader characteristic of twentieth-century American social science and society, namely to ‘think behavioristically’ (Mills, 1998, p. 1; see also for example Ross, 1991). To think behavioristically is to equate ‘theory with application, understanding with prediction, and the workings of the human mind with social technology’ (Mills, 1998, p. 2). Although the behavioral economics discussed in this chapter does not directly relate to behaviorism, it is part of the twentieth-century American focus on thinking behavioristically. It was after World War II that behavior’s adverbial conjugation ‘behavioral’ was introduced in relation to science and economics. The usage of ‘behavioral economics’ was initially popularized at the University of Michigan’s Survey Research Center in the late 1940s, where George Katona understood behavioral economics as investigating economic behavior, that is, the subclass of behavior produced in the course of the agent’s activities in the economy (for example Festinger and Katz, 1953, Juster, 2004). Other users of the adverb ‘behavioral’ included...
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