This chapter describes the emergence of economic psychology as a discipline, including key developments in theories of economic decision-making, and considers the relationship between behavioural economics and economic psychology. It introduces some of the economic-psychological issues related to life-span development and to society. The chapter also presents a bounded rationality perspective of insurance decisions as a means of protection against financial loss and discusses the causes of mis-selling and related consumer protection matters and explores the prevalence of insurance fraud and approaches to prevention. Economic psychology draws broadly on contemporary psychology, which includes the primary goal of modelling mental life. The origins of economic psychology can be traced to Greek philosophers and, more recently, to seventeenth-century economists who reflected on psychological matters, notably Adam Smith. Finally, it traces the emergence of the discipline, from Adam Smith to George Katona and Herbert Simon, and also discusses its relationship with behavioural economics.
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