Does psychology really matter?

A Little Psychology Does Economics Some Good

In Chapter 17 of his new book, “Misbehaving,” behavioral economics founder Richard Thaler describes a conference that was held at the University of Chicago in 1985 solely for the purpose of debating the value of the new field. That’s a pretty remarkable event — new areas of economics research usually get lots of buzz, but a special conference like that is rare. It shows that behavioral econ didn’t just generate excitement; it also generated a sense of threat. The threat was that of a paradigm shift. This term, coined by philosopher Thomas Kuhn, refers to the dread moment when scientists learn that up is down, black is white and everything they thought they understood about the world is wrong. Kuhn said that paradigm shifts happen when enough “anomalies” are found in the existing theory that a reconsideration becomes unavoidable. It’s probably not a coincidence that Chapter 18 of Thaler’s book is called “Anomalies.” ….[READ]

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