Kahneman and Tversky and the making of behavioral economics

Abstract

The twofold aim of this thesis is to understand Daniel Kahneman's and Amos Tversky's research, and to understand how this research has altered economics in fundamental ways.I frame my historical analysis in terms of Peter Galison's disunity concept.Galison uses the notion of the disunity of science to capture the idea that sciences and scientific practices may be separate and different, but at the same time be communicating and mutually influencing each other.I start by discussing the work of the mathematical psychologists and behavioral decision researchers at the University of Michigan in the 1950s and 1960s.I argue that the key to understanding mathematical psychology and behavioral decision research is to see that, although largely separated and focused on different questions, both presumed the same two-sided understanding of psychology.In order to measure, one needed a sound theory of the measurement instrument, which was the human decision maker.This double understanding of psychology as using a measurement instrument to investigate that same measurement instrument became problematic when it turned out that the measurement instrument did not behave as it should.That was the problem Tversky struggled with.Tversky had to choose between declaring the experimental results invalid and saying that the received theory of the measurement instrument was incorrect.Kahneman came to the rescue by suggesting that the human decision maker systematically and predictably deviates from how it should behave.Thus, the experimental results could be accepted, while at the same time the axioms of the measurement theory could be maintained.It did, however, give psychology the new task of investigating how and when human decision makers deviate from how

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