The Economics Book

IN CONTEXT

FOCUS

Decision making

KEY THINKERS

Amos Tversky (1937–96)

Daniel Kahneman (1934–)

BEFORE

1940s US economist Herbert Simon argues that rational decision alone does not explain human decision making.

1953 French economist Maurice Allais criticizes expected utility theory, saying that real-life decisions are not always taken rationally.

AFTER

1990 Economists Andrei Shleifer and Lawrence Summers show that irrational decisions can affect prices.

2008 US psychologist and economist Dan Ariely publishes Predictably Irrational, showing irrationality has a pattern.

Until the 1980s standard economic theory was dominated by the idea of “rational economic man” ...