Timeline of Behavioral Economics
How psychology entered economic models of choice, from Bernoulli's account of utility in 1738 to prospect theory, retirement-saving experiments, and large-scale tests of nudges in 2022.
- Category
- Social Sciences
- Events
- 18 events 1738 – 2022
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- by gpt-6
1738: Bernoulli distinguishes utility from monetary value
Daniel Bernoulli proposed evaluating risky prospects through the utility of wealth rather than expected money alone. His treatment of the St. Petersburg paradox gave a mathematical account of why an additional unit of wealth could matter less to a richer person.
https://en.wikipedia.org/wiki/St._Petersburg_paradox1759: Smith examines sympathy and self-command
Adam Smith published "The Theory of Moral Sentiments," examining sympathy, moral judgment, and self-command. The work placed social motives and the judgment of an imagined impartial spectator at the center of his account of conduct.
https://en.wikipedia.org/wiki/The_Theory_of_Moral_Sentiments1953: Allais challenges expected utility theory
Maurice Allais presented choices in which many people's preferences violated the independence axiom of expected utility theory. The Allais paradox made attitudes toward certainty a test of the standard model of risky choice.
https://en.wikipedia.org/wiki/Allais_paradox1955: Simon models limits on rational choice
Herbert Simon published "A Behavioral Model of Rational Choice," replacing unlimited calculation with constrained search and aspiration levels. The approach helped establish bounded rationality as a way to analyze decisions made with limited information and processing capacity.
https://en.wikipedia.org/wiki/Bounded_rationality1961: Ellsberg separates ambiguity from measurable risk
Daniel Ellsberg described choices in which people preferred known probabilities to unknown ones, even when the pattern conflicted with subjective expected utility. His urn examples made ambiguity aversion a distinct problem in decision theory.
https://en.wikipedia.org/wiki/Ellsberg_paradox1974: Tversky and Kahneman summarize judgment heuristics
Amos Tversky and Daniel Kahneman published "Judgment under Uncertainty: Heuristics and Biases." They explained how representativeness, availability, and anchoring could simplify judgment while producing systematic errors in particular tasks.
https://en.wikipedia.org/wiki/Heuristic_(psychology)1979: Kahneman and Tversky publish prospect theory
Daniel Kahneman and Amos Tversky modeled risky choice around gains and losses relative to a reference point. Prospect theory used a value function and decision weights to explain patterns that expected utility theory struggled to accommodate.
https://en.wikipedia.org/wiki/Prospect_theory1980: Thaler applies psychology to consumer choice
Richard Thaler published "Toward a Positive Theory of Consumer Choice." He connected economic anomalies, including the endowment effect and responses to sunk costs, to psychological accounts of how people evaluate transactions.
https://en.wikipedia.org/wiki/Richard_Thaler1982: Ultimatum experiments expose limits of self-interest
Werner Güth, Rolf Schmittberger, and Bernd Schwarze reported an experiment in which one participant proposed a split of money and another could reject it. Rejections of low offers challenged the prediction derived from narrowly monetary self-interest.
https://en.wikipedia.org/wiki/Ultimatum_game1985: Thaler develops mental accounting
Richard Thaler described how people assigned money to mental budgets and evaluated purchases through separate accounts. Mental accounting offered explanations for behavior that treated otherwise interchangeable money differently depending on its source or intended use.
https://en.wikipedia.org/wiki/Mental_accounting1986: Fairness enters models of market behavior
Daniel Kahneman, Jack Knetsch, and Richard Thaler reported survey evidence that judgments of fairness constrained acceptable price increases and wage cuts. Their work treated perceived entitlements as a potential influence on market transactions.
https://en.wikipedia.org/wiki/Daniel_Kahneman1997: Laibson models present-biased saving
David Laibson published "Golden Eggs and Hyperbolic Discounting," using a model in which immediate rewards received disproportionate weight. The analysis connected inconsistent plans over time with demand for savings arrangements that restricted future choices.
https://en.wikipedia.org/wiki/Hyperbolic_discounting2002: Economic sciences prize recognizes psychological evidence
Daniel Kahneman shared the economic sciences prize with experimental economist Vernon Smith. The award recognized Kahneman's integration of psychological research into economics and Smith's use of laboratory experiments to study markets.
https://en.wikipedia.org/wiki/List_of_Nobel_Memorial_Prize_laureates_in_Economic_Sciences2004: Thaler and Benartzi report Save More Tomorrow
Richard Thaler and Shlomo Benartzi published results from a retirement-saving program that let employees commit portions of future pay increases to savings. The design used advance commitment and automatic escalation to address inertia and reluctance to reduce current take-home pay.
https://en.wikipedia.org/wiki/Shlomo_Benartzi2008: Thaler and Sunstein publish "Nudge"
Richard Thaler and Cass Sunstein argued in "Nudge" that the presentation of choices could influence decisions without eliminating options. Their account of choice architecture brought defaults and other behavioral interventions into wider policy debate.
https://en.wikipedia.org/wiki/Nudge_(book)2010: Britain establishes the Behavioural Insights Team
The British government created a team to apply behavioral research to public policy. Its work helped make randomized trials of changes to letters, forms, and other administrative processes a visible part of government practice.
https://en.wikipedia.org/wiki/Behavioural_Insights_Team2017: Thaler receives the economic sciences prize
Richard Thaler received the economic sciences prize for contributions to behavioral economics. The award highlighted his work on limited rationality, social preferences, and self-control, connecting individual decision-making with economic analysis.
https://en.wikipedia.org/wiki/List_of_Nobel_Memorial_Prize_laureates_in_Economic_Sciences2022: Large trials test nudges at scale
Stefano DellaVigna and Elizabeth Linos published a comparison of trials from two United States nudge units with academic studies. Average effects in the government trials were smaller, emphasizing the importance of publication selection and testing interventions at their intended scale.
https://en.wikipedia.org/wiki/Stefano_DellaVigna