On some antecedents of behavioural economics

Abstract

Since its inception in the late 1970s, behavioural economics has gone from being an outlier to a widely recognized yet still contested subset of the economic sciences. One of the basic arguments in behavioural economics is that a more realistic psychology ought to inform economic theories. While the history of behavioural economics is often portrayed and articulated as spanning no more than a few decades, the practice of utilizing ideas from psychology to rethink theories of economics is over a century old. In the first three decades of the 20th century, several mostly American economists made efforts to refine fundamental economic assumptions by introducing ideas from psychology into economic thinking. In an echo of contemporary discussions in behavioural economics, the ambition of these psychology-keen economists was to strengthen the empirical accuracy of the fundamental assumptions of economic theory. In this article, we trace, examine, and discuss arguments for and against complementing economic theorizing with insights from psychology, as found in economic literature published between 1900 and 1930. The historical analysis sheds light on issues and challenges associated with the endeavour to improve one discipline’s theories by introducing ideas from another, and we argue that these are issues and challenges that behavioural economists continue to face today.

Not so ‘dumb money’? Constituting professionals and amateurs in the history of finance capitalism

“…Professional speculators were able to draw profit from speculative panics, which Hoyle (1898: 39) evocatively called a ‘disease of the public mind’. The idea that financial markets were under the sway of the public mind – sometimes less flatteringly referred to as ‘the mob mind’ (Ross, 1908; Sidis, 1895) – and that there existed national differences in terms of the psychology of publics (Le Bon, 1898; Münsterberg, 1904) was an import from crowd theory and social psychology (Hansen and Presskorn-Thygesen, 2022). Correspondingly, Hoyle’s advice to amateur speculators was to try to adopt the professionals’ strategy and exploit the gullible public.…”