Article

Journal of Risk and Uncertainty

, Volume 16, Issue 1, pp 7-47

First online:

Amos Tversky and the Ascent of Behavioral Economics

  • David LaibsonAffiliated withDepartment of Economics, Harvard UniversityThe National Bureau of Economic Research
  • , Richard ZeckhauserAffiliated withKennedy School of Government, Harvard UniversityThe National Bureau of Economic Research

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Abstract

Amos Tversky investigated and explained a wide range of phenomena that lead to anomalous human decisions. His two most significant contributions, both written with Daniel Kahneman, are the decision-making heuristics—representativeness, availability, and anchoring—and prospect theory. Tversky's concepts have broadly influenced the social sciences. In economics, they gave rise to the burgeoning field of behavioral economics. This field, skeptical of perfect rationality, emphasizes validation of modeling assumptions, integration of micro-level data on decisions (including experimental evidence), and adoption of lessons from psychology. Tversky's contributions are reviewed, assessed using citation analysis, and placed in historical context. Fertile areas for behavioral economics research are identified.

Behavioral economics decision theory heuristics and biases prospect theory psychology and economics rationality