The relationship between psychology and economics

What is the relationship between psychology, economics and political science? -

the relationship between psychology and economics

PDF | On Oct 8, , Petru-Claudiu Ghiuzan and others published The relationship between economics and psychology. The relationship between Psychology and Economics: The case of Behavioural Finance. Dr. Guillermo Campitelli. Similarities: Adam Smith: The Theory of Moral . Title. The relationship between Psychology and Economics: The case of Behavioural Finance. Authors. Guillermo Campitelli. Document Type. Presentation.

Behavioral economics is a new and promising field of investigation Katona Not only psychologists but also sociologists may contribute to the consumer population survey approach. The emphasis on observation rather than self-report is. Observations of behavior are generally preferred over self-reports, the latter being more susceptible to social desirability biases. Only, if observation of consumer behavior is impossible or too expensive, one could make use of self-reports. Self-reports are also necessary for the measurement of unobservable theoretical constructs, such as values, attitudes, and expectations.

A last comment with regard to Cook's contribution is the forgotten dimension of cross-section vs time-series Van Raaij A three-dimensional figure 2 would then contain eight entries: Repeated vs single observation of a population; II. Scanner panel vs one-time observation of individuals; III. Repeated vs single cross-sections, cf. Diary panel vs one-time self-reports by individuals. Total automobile sales and total consumer debt over a year period can be explained by income and psychological variables, such as the Index of Consumer Sentiment, evaluations of buying conditions for vehicles, traditional price rationales and advance buying rationales given for market evaluations.

One may wonder, however, whether the year period should not be divided in an affluence and a recession period.

The Relationship Between Psychology and Economics

Both periods may be different with regard to the determinant variables and the structural relationships, assuming that economic prosperity and recession are not the opposite sides of the same phenomenon. Curtin concludes that consumer reactions to the economic environment have become more complex during the recent years and more important for the analysis of cyclical trends in consumer spending and saving behavior.

However, in a period of recession discretionary income will go down. This may lead to less variance in consumer behavior and thus to more predictability in consumer spending and saving. They find dependencies between demographic characteristics and product usage levels. The following demographic variables are used: Linear relationships between demographic characteristics and product usage are not always significant; nonlinear relationships certainly exist and may be detected with chi-square analysis.

This may be useful for market segmentation. Most linear techniques, such as multiple regression, may not catch the nonlinear relationships, although nonlinear adaptations may demonstrate these relationships. Demographics remain important to describe market segments, and it is largely a matter of statistical techniques to obtain an adequate description.

Are demographics really dead? Sheth concludes that discarding demographics is premature at best. One should integrate demographic, psychographic, and personality variables to obtain a complete picture.

Other factors should be linked to demographics, even if they are more relevant to describe a market segment. Demographic variables link the census data to the life-style data of market researchers. An interesting observation in the Utsey-Cook paper is the micro-macro distinction. Demographics may be useful at the group level and not at the individual level Bass, Tigert, and Lonsdale Although demographics may not explain the variance in product usage very well, demographic variables remain useful as segmentation variables.


Segments such as nonusers, light and heavy users may be distinguished and characterized by demographics. This way of using demographic variables has never been dead, to my knowledge. The experimenter controls the reward structure and privacy of the experimental subjects. The experiments gets a "game-like" and abstract character and may become difficult to understand for the average consumer or experimental subject.

Using students rather than the average consumer in experiments may bias the outcomes Van Raaij, ] Social interaction and reference the "privacy" precept are excluded.

the relationship between psychology and economics

The experimental subject operates in an abstract market without knowing the behavior of other individuals except in the aggregate. Emphasis is on observed rather than self-reported behavior.

Psychology in economics before the marginalist revolution Hume, Smith, Condillac, Quesnay, James Mill, John Stuart Mill Psychophysics, psychology and the pre marginalists Gossen, Jevons, Walras, Marshall, Edgeworth, Pareto and Fisher, psychology in the Austrian tradition Psychologists, economists, and the birth and development of experimental psychology Psychology in the institutionalist and Keynesian schools of thought Veblen, Mitchell, J.

The Relationship between Psychology and Economics: Insights from the History of Economic Thought

How psychologists have been involved in the development of behavioral economics and alternative paradigms to study economic behavior e. Kahneman, Tversky, Slovic, Gigerenzer?

  • Psychology and Economics: Areas of Convergence and Difference
  • There was a problem providing the content you requested
  • What is the relationship between psychology, economics and political science?

Did economics borrow concepts and laws from psychology or did they rather borrow methods? What has been the influence of behavioral sciences, marketing and business studies on the development of behavioral economics?

Psychology and economics in historical perspective

What have been the effects of behavioral economics on public policy? Did public policy foster the development of behavioral economics?

What have been the after effects of behavioral economics on the representation of utility and welfare?

the relationship between psychology and economics

Pigou, Boulding, Scitovsky, Easterlin, Happiness economics How has behavioral economics come into different fields of economics finance, development economics, health economics, social choice, public economics, normative economics?

The historical development of neuroeconomics and its links with psychology. The role of normative considerations in the development of behavioral economics.