Since the seminal works of Daniel Kahneman and Amos Tversky in the 1970s, behavioural economics has experienced astonishing growth in both its reach and influence. It is now firmly established as a field in its own right, encompassed within the wider discipline of economics (see Earl 2005):

• • Three Nobel Prizes have been awarded to academics for their work relating to behavioural economics: Herbert Simon in 1978 and Daniel Kahneman and Vernon Smith in 2002.

• • There now exists substantially more than 50,000 papers citing the two pioneering works of Kahneman and Tversky (Burnham 2013).

• • There are an ever-expanding number of dedicated academic societies (such as the Economics Science Association, the Society for the Advancement of Socio-Economics and the Society for the Advancement of Behavioural Economics) and journals (including the Journal of Economic Behavior and Organisation, the Review of Behavioural Economics, Experimental Economics and the Journal of the Economics Science Association).

• • Universities are now competing with one another to offer courses in the field and the subject is being taught as part of the curriculum for A level economics in the UK.

The relationship between those studying economics as a whole and those examining economic decision-making in particular has not always been straightforward, however, and has undergone a number of shifts over the past 180 years. There is an argument that this relationship remains one of tension and distrust rather than of mutual admiration and acceptance (see Chapter 7).

The classical era

No one can be criticised for asserting that economists have always been concerned with the study of how we – as individuals, families and groups such as businesses – actually make economic decisions. With economics being commonly defined as the “science which studies human behaviour as a relationship between given ends and scarce means which have alternative uses” (Robbins 1932: 15), such an assertion seems both innocuous and self-evident.

During the era of classical economics, this assertion was certainly true. This is most clearly demonstrated in the works of Adam Smith, who is now considered the father of modern economics. Born in Scotland, kidnapped by gypsies at the age of four, educated at the University of Oxford and prone to exceptionally eccentric behaviour, Smith was actually a classical philosopher who spent most of his academic life at the University of Glasgow.