Exploring the Origins of Behavioral Economics

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This chapter delves into the historical beginnings of behavioral economics, tracing back to the groundbreaking work of Kahneman and Tversky on heuristics and biases in decision-making. It highlights the integration of psychology and economics to form behavioral economics, emphasizing the pivotal role played by foundations like Russell Sage in funding research. The chapter underscores the importance of fostering relationships and the emergence of new ideas within the field through influential gatherings of behavioral economists.

In 1974, two psychologists, Daniel Kahneman and Amos Tversky, as the New Yorker once put it, "changed the way we think about the way we think." The prevailing wisdom, before their landmark research went viral (in the way things went viral in the 1970s), was that human beings were, for the most part, rational optimizers always making the kinds of judgments and decisions that best maximized the potential of the outcomes under their control. This was especially true in economics at the time. The story of how they generated a paradigm shift so powerful that it reached far outside economics and psychology to change the way all of us see ourselves is a fascinating tale, one that required the invention of something this episode is all about: The Psychology of Single Questions.

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