Rational Choice Theory Versus Cultural Theory

On Taste and Social Capital

Authored by: Peter Lunt

Handbook of Contemporary Behavioral Economics

Print publication date:  July  2006
Online publication date:  January  2015

Print ISBN: 9780765613028
eBook ISBN: 9781315703879
Adobe ISBN: 9781317469162


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There is, quite justifiably, a great deal of excitement and interest in the achievements and the potential for interdisciplinary collaboration between economics and psychology. In this essay, while not wishing to detract from these developments at all, I will consider a potential area for collaboration that remains relatively unexplored: the intersection between economics, social psychology, and sociology. The dominant approaches to the intersection between psychology and economics are applications of ideas from cognitive psychology to problems in economics. Psychologists have offered alternatives to economic accounts of behavior and decision making in positive contributions to understanding bounded rationality (Kahneman, Slovic, and Tversky 1982), economic decisions as games (Camerer 1997), emotions (Loewenstein 2000), mental accounting (Thaler 1992), and the behavioral life cycle (Shefrin and Thaler 1988). I would not go as far as Fine (2001), who argues that these developments are less collaboration than appropriation of the psychological by an imperialistic economics, but I would say that the collaboration is only on certain terms. What has proved most fruitful in interdisciplinary writing between economics and psychology is the application of cognitive principles to anomalies in economic theories. In contrast, social psychological theories and findings are largely ignored (Lunt 1995, 1996), and this may be partly because although cognitive psychologists are critical of economics, particularly of the rationality assumptions of economic analysis of consumer behavior, they nevertheless have many things in common with economists in the focus on choice and decision making, in the focus on individual cognitive processes, and in the assumption that abstract principles of decision theory are the best explanation of economic behavior.

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