ABSTRACT
Personality, moods, emotions and visceral factors play a crucial role in our everyday decision-making, a facet of behaviour that modern economists have been slow to explore. This chapter shows that the analysis by exploring the impacts on economic behaviour of heterogeneity and individual differences including demographic characteristics, personality traits and cognitive/non-cognitive skills. Personality will have an impact on emotions because it determines an individual’s predispositions; for example, a person with an optimistic personality will be more inclined to feel cheerful. In understanding how personality, moods and emotions influence economic and financial decision-making, insights from psychology provide an important starting point. One of the pioneering approaches to analysing personality and traits was Sigmund Freud’s psychoanalytic theory. Freud analysed a very wide range of forces affecting personality, including different levels of consciousness including conscious, preconscious and unconscious thought. Some Freudian themes resonate with new insights from neuroscience.
