ABSTRACT
In behavioural economic models, people look to others when making decisions and when seeking happiness. Economics went through something like a behavioural “dark age” – in which key insights from other social sciences were lost – until the major resurgence of behavioural and psychological economics in the 1980s and 1990s. In understanding why, it is useful to explore the historical development of behavioural economics and some of the behavioural approaches that preceded economics as we see it – from David Hume in the 18th century through to Hyman Minsky in the 20th century. Adam Smith foreshadowed the importance of sentiment in modern behavioural economics, with his emphasis on social, unsocial and selfish passions – focusing on the importance of vividness in events in determining how strongly we respond to them. The chapter also presents an overview of the key concepts discussed in this book.
