Behavioral economics

"Since its inception nearly three decades ago, behavioural economics has upset the pristine premise of classical economic theory—the view that individuals will always behave rationally to achieve the best possible outcome. Today it’s clear that the vagaries of individual and group psychology can cause irrational decision making by both individuals and organizations, resulting in less than ideal outcomes."

"The essay discusses the rise of (modern) behavioral economics during the last few decades. In contrast to ’s assertion, in his Feb. 11, 2001, NY Times essay, that behavioral economics began in 1994, I would try to argue that it began during the 1950s and early 1960s, although some aspects of it had even emerged in the works of Marshall, Wesley Mitchell, J.M. Clark and others, before WWII."

"In sum, we need to augment and amend the existing body of classical and neoclassical economic theory to achieve a more realistic picture of economic processes as well as a more accurate understanding of the equilibrium toward which these processes move."