Kahneman and Tversky and the making of behavioral economics

Abstract

In the 1950s and 1960s, mathematical psychology and behavioral decision research arose in the unique context of the University of Michigan. These two psychological programs gave rise to Daniel Kahneman and Amos Tversky's famous research of the 1970s. In the early 1980s, Kahneman and Tversky's research was incorporated into financial economics, resulting in the new field of behavioral finance. In the 1990s, behavioral finance broadened its scope and became behavioral economics, a dominant new research program in economics. Despite its explorations in various directions and its claim of Herbert Simon's heritage in the 2000s, behavioral economics remains firmly attached to the framework as set out by Kahneman and Tversky.