Behavioral economics and the nature of neoclassical paradigm

Lorenzo Esposito and Giuseppe Mastromatteo
Additional contact information
Giuseppe Mastromatteo: Università Cattolica del Sacro Cuore

Mind & Society: Cognitive Studies in Economics and Social Sciences, 2024, vol. 23, issue 1, No 3, 45-78

Abstract: Abstract Psychological observations are by now well integrated into economics, especially in the theory of finance, as can also be seen in the Nobel Prize awarded to Thaler. On the contrary, Simon’s attempt to reforge economic theory on the paradigm of bounded rationality failed. Starting from the birth of the neoclassical paradigm, we’ll describe the attempt to give it psychological foundations with a direct measurement of utility, then the axiomatic turn of the paradigm and its first anomalies. We’ll then sum up the debate on rationality, taking place in the group of economists led by Simon, which brought to the rational expectations hypothesis. Finally, we’ll discuss the development of behavioral economics and its progressive acceptance in economic theory. This historical reconstruction allows us to understand the actual hard core of the neoclassical paradigm and the growing need of the paradigm for practical flexibility that determines how to choose arguments, methods and evidence that can be useful to its development, including psychological ones.

Keywords: Simon; Bounded rationality; Behavioral economics; Rational expectations; Expected utility theory (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11299-024-00303-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:minsoc:v:23:y:2024:i:1:d:10.1007_s11299-024-00303-y

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/11299

DOI: 10.1007/s11299-024-00303-y

Access Statistics for this article

Mind & Society: Cognitive Studies in Economics and Social Sciences is currently edited by Riccardo Viale

More articles in Mind & Society: Cognitive Studies in Economics and Social Sciences from Springer, Fondazione Rosselli Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().