ABSTRACT
Classical political economy was part of a budding social science. Pioneers like Adam Smith showed a clear interest in the psychological (as well as sociological and political) aspects of economic behavior. Paradoxically, it seems to have been the “marginal revolution” toward the end of the 19th century, when attention got focused on marginal trade-offs in individual decision making, that turned the tide. Stimulated by the emerging hypothesis of a rational and selfish economic agent with stable preferences (homo economicus)—which proved to be handy for mathematical modeling and was thereby reinforcedpolitical economy developed into the economics we know today. At about the same time, psychology established itself as a separate and experimental science through the work of, among others, Wilhelm Wundt. An important methodological distinction was generated, with economics developing itself into a deductive science, taking the homo economicus model as its starting point, and psychology as an inductive science, working from experimental data. Some serious attempts were made, in particular by George Katona, to bring the two closer together again. However, the main impact has been restricted to consumer behavior in marketing (economic psychology). This is, of course, a very rough historical sketch. Over time, several prominent economists occasionally referred to the importance of psychological factors, like, for instance, the “animal spirits” that are driving investment in the view of John Maynard Keynes. Nevertheless, the idea of a “calculus of pleasure and pain”
(Jeremy Bentham) had definitively lost impetus, and Adam Smith’s (other) classic work on moral sentiments had fallen into obscurity.
