Economics has come full circle

Herman Brodie  |  Prospecta  |  14 December 2020  |  0.25 CE

Classical economists often incorporated human behaviour into their thinking. For example, Adam Smith talked about the conflict between “the passions” and “the impartial spectator”. But in the 1960s and 1970s, economists sought to introduce more mathematical tractability into the discipline, and homo economicus - the great rational agent of economic theory - was born. It was not until the 1990s, when psychologists discovered additional limits to arbitrage which were tied to human nature, that the link between human behaviour and economics began to be re-established. In the 21st century, economic...

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