Economists conceptualize a world populated by calculating, unemotional maximizers. This view shapes our understanding of many crucial elements of development economics-from how rural villagers save, to how parents decide on whether to send their children to school. Psychological research, however, has documented the incompleteness of this perspective. Individuals have self-control and time inco...

For most of my career, being an economic theorist has involved building models of economic phenonomena using two fundamental ideas, rational choice and equilibrium, as building blocks. The assumption of rational choice in a model of human behavior is not as restrictive as it sounds. It simply requires that each decision maker have consistent preferences over all possible alternatives and that h...

This article proposes an approach to improving the psychological realism of economics while maintaining its conventional techniques and goals: formal theoretical and empirical analysis using tractable models, with a focus on prediction and estimation. These techniques have proven valuable for studying the behavioral and welfare implications of economic phenomena—oil shocks, higher education, jo...

The article questions the methodology of " economics and psychology " in its focus on the case of hyperbolic discounting. Using some experimental results, I argue that the same type of evidence, which rejects the standard constant discount utility functions, can just as easily reject hyperbolic discounting as well. Furthermore, a decision-making procedure based on similarity relations better ex...

Department of Psychology, Stellenbosch University, Private Bag X1, Matieland 7602, Cape Town, South Africa Personal Social Services Research Unit, London School of Economics and Political Science, Houghton Street, London WC2A 2AE, UK LSE Health, London School of Economics and Political Science, Houghton Street, London WC2A 2AE, UK Peterborough Child Development Centre, City Care Centre, Thorpe ...

Economics and psychology are both sciences of human behaviour. This paper gives a survey of their interaction. First, the changing relationship between the two sciences is discussed: while economics was once imperialistic, it has become a science inspired by psychological insights. In order to illustrate this, recent developments and evidence for three major areas are presented: bounded rationa...

ÁGNES SZŐLLŐSI*, ATTILA KERESZTES, BÁLINT NOVÁK, BARNABÁS SZÁSZI, SZABOLCS KÉRI and MIHÁLY RACSMÁNY Department of Cognitive Science, Budapest University of Technology and Economics, Budapest, Hungary Center for Lifespan Psychology, Max Planck Institute for Human Development, Berlin, Germany Department of General Psychology, Pázmány Péter Catholic University, Budapest, Hungary Institute of Psych...

My goals in this paper are: (i) To give a pithy, opinionated summary of what has been learned about bounded rationality in individual decision making from experiments in economics and psychology (drawing on my 1995 Handbook of Experimental Economics chapter); and (ii) mention some promising new directions for research which would be included if that chapter were