chapter  11
11 Pages

Rationality in behavioural economics

Four decades ago, Herbert Simon announced two distinct scenarios in the

future evolution of economic theorizing, both leading to a closer collab-

oration between economics and psychology. The first involved “the direct

‘psychologizing’ of economics, the explicit adoption of the program of

economic behavioralism”. The second scenario engaged economics with

“operations research and statistical decision theory, introducing a wider

and wider range of computational considerations into the models of ration-

ality” (Simon 1976: 147). Simon in fact, wrote the first scenario to be per-

formed by cognitive psychologists, such as Tversky, Slovic and

Kahneman, only to devote himself to the development of the second scen-

ario, when he decided to move from the psychology to the computer

science department of Carnegie Mellon University. Unquestionably,

Simon dismissed the neoclassical theory in favour of a behavioural

approach to economic phenomena. In his contribution in the Palgrave Dictionary he focused on the dissident character of the field: “behavioral economics is concerned with the empirical validity of these neoclassical

assumptions about human behavior and, where they proved invalid, with

discovering the empirical laws that describe behavior correctly and as

accurately as possible” (1987b: 221). Whether this dissident character

remained a distinctive trait of the field is a matter of discussion, but the

originality of the behaviourist rationality principle cannot be questioned.