Behavioral Economics

Program importing psychology's systematic biases into economics, replacing strict rationality with prospect theory.

Specifications & Metrics

era

1979 onward

founders

Daniel Kahneman, Amos Tversky, Richard Thaler

signature

Bounded rationality, loss aversion, and systematic bias (1979)

Core Principles & Analysis

• Kahneman and Tversky's prospect theory (1979) modeled loss aversion and reference dependence.
• Thaler's nudges and mental accounting moved the findings into policy defaults and retirement saving.
• Kahneman won the 2002 Nobel; Thaler followed in 2017.

Sources

• Econlib Concise Encyclopedia of Economics: Behavioral Economics