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psychology and economics

Plott, Charles R. (1987) psychology and economics. In: The New Palgrave: A Dictionary of Economics. Vol.3. Stockton Press , New York, pp. 1037-1040. ISBN 0935859101.

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[Introduction] Several developments have joined to stimulate economists to think about issues that have been on the forefront of psychological research. First, the information revolution in economics has focused economists on the subtle nature of individual information processing. Secondly, developments in game theory have so successfully identified new solution concepts that for almost any pattern of market behaviour there exists a reasonable theory consistent with that pattern. lntrospection, a few principles of decision making, internal consistency, and a few stylized facts do not constrain possibilities enough to be sufficient guides to theory. Theorists are being forced to seek more systematic sources of data and additional principles to reduce the number of competing theories. Third, the rapid development of experimental methods applicable to economics has brought the testing of psychologically based economic theories within the realm of reality. Economists can accurately measure behaviour in economically relevant settings. As behavioural patterns become established that are difficult to reconcile with economic alone, the profession has begun to look to psychology for answers. The data thus force the attention of economists to a broader class of models.

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Official Citation:Plott, Charles R. "psychology and economics." The New Palgrave: A Dictionary of Economics. First Edition. Eds. John Eatwell, Murray Milgate and Peter Newman. Palgrave Macmillan, 1987. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 17 April 2014 <> doi:10.1057/9780230226203.3356
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:44498
Deposited On:17 Apr 2014 20:38
Last Modified:10 Nov 2021 16:52

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