Heuristics and biases to behavioural economics: a sociology of a psychology of error
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Kamwendo, Zara Thokozani
This thesis is a sociological history of the making of behavioural economics. Behavioural economics is a discipline in which economists draw on psychological knowledge and approaches to understand economic behaviour. The narrative begins with the lives and work of psychologists Daniel Kahneman and Amos Tversky in the newly established state of Israel. It then moves from the making of the so called Heuristics and Biases Programme in the 1970’s to the privately funded Behavioural Economics Program in the USA in the 1980’s. Using a blend of analysis of archival documents, published material, and interviews I seek to understand the formation of the discipline of behavioural economics by applying the notion of a psychology)of)error as an analytical tool. The small number of historians who have studied behavioural economics have all identified a concern with human error as a crucial element of its intellectual makeup. I take this observation further by arguing that both Kahneman and Tversky’s Heuristics and Biases Programme and behavioural economics are psychologies) of) error because the object to be explained in both fields was restricted to behavioural deviations from a normative core. In the case of Heuristics and Biases that normative core consisted of a blend of statistical and logical norms imported from traditional decision theory about what constituted rational decision making. In the case of behavioural economics the normative core was made up of assumptions about rational economic behaviour developed by neo-classical economists. Understanding behavioural economics as a psychology of error allows me to shed light on the complicated relationship between behavioural economics and neo-classical economics. Specifically it helps explain how behavioural economists sought to strike a careful balance between critiquing the descriptive claims of neo-classical economists and reinforcing their normative ambitions.