Welcome to the homepage of Division 9 of the IAAP.
IAAP: Division 9: Economic Psychology
Erich Kirchler, University of Vienna, Austria
2010 09 12
Division 9: Economic Psychology
Division 9, Economic Psychology, is a small but active section in IAAP. As a discipline, Economic Psychology is concerned with understanding human experience and human behaviour in economic contexts.
Economic Psychology functions as a bridge between Economics and Psychology and dates back as far as 1900. Gabriel Tarde (1902) in France is assumed to be the first to use the term “economic psychology”. He pointed to the need to analyse economic behaviour from a psychological perspective.
Economics studies judgements and decisions on the use of scarce resources for the purpose of satisfying a multiplicity of human needs. People normally find themselves unable to satisfy all their needs, and are forced to choose between alternatives. Their choice of one option out of a set of various alternatives in turn involves the pain of renouncing the advantages of all the other options. In economics, decisions on the allocation of scarce resources are described on the premise of rationality and maximization of utility. Economics has constructed highly sophisticated formal decision-making models to explain and predict economic behaviour, starting from only a small number of axioms on the logic of human behaviour. These highly sophisticated, mathematical models often do not consider psychology. This is an unacceptable limitation argue economic psychologists and also behavioural economists.
Classical economics, which traces its origins to Adam Smith’s (1776) “Wealth of Nations”, found itself challenged already towards the end of the 19th century. Thorstein Veblen (1899) opposed the basic assumptions of rationality and utility maximization with his findings on conspicuous consumption, showing that some goods become particularly desirable when the price rises. He expressed the criticism that economics does not consider cultural factors and social change. Wesley C. Mitchell (1914) predicted already at the beginning of the last century that slight but significant change would to be taking place in the attitude of economic theorists toward psychology. Around the same time, Clark (1918) wrote that economists may attempt to ignore psychology, but it is a sheer impossibility to ignore human nature in a science of human behaviour as is economics.
In the late 1940s, George Katona and Günther Schmölders began to design a psychology of macroeconomic processes. Katona (1951) stresses the importance of psychology for economics and vice versa of economics for psychology by referring to economic research as consisting in the need to discover and analyze the forces behind economic processes, the forces responsible for economic actions, decisions and choices. Economics without psychology will not succeed in explaining important economic processes and psychology without economics will not succeed in explaining some of the most common aspects of human behaviour. Among economists, the voice of Herbert Simon attracted particular attention. He saw restrictions to the validity of the widely accepted rational model, especially in human’s limited cognitive capacities.
Economics and psychology showed an interest in the other discipline early on. It has long been beyond dispute on both sides that psychology and economics have not only extensive common boundaries, but also an overlap in the questions they pose. The main argument was that not money, inflation rate, or unemployment figures by themselves influence each other, but that people act and interact in a given economic environment and thereby change it.
Economic Psychology has gained considerable momentum in the last three decades. A major step towards institutionalisation and recognition in the scientific community have been the founding of the International Association for Research in Economic Psychology (IAREP; see http://www.iarep.org/) and the Society for the Advancement of Behavioral Economics (SABE; see http://www.sabeonline.org/) which join under the umbrella oranization “The International Confederation for the Advancement of Behavioral Economics and Economic Psychology” (ICABEEP; see http://www.iarep.org/ICABEEP.htm). The International Association for Research in Economic Psychology was founded primarily by European psychologists and economists which issues the “Journal of Economic Psychology” (http://www.elsevier.com/wps/find/journaldescription.cws_home/505589/description#description) the United States, the Society for the Advancement of Behavioral Economics issues the “Journal of Socio-Economics” (see http://www.elsevier.com/wps/find/journaldescription.cws_home/620175/description). The introduction of the “Journal of Economic Psychology“ in 1981, the “Journal of Socio Economics”, and especially the recognition of the research by Daniel Kahneman and Amos Tversky by the Nobel Prize Committee have made Economic Psychology to a prospering social science.
Kirchler and Hölzl (2003, 2006) provide a review of the development of economic psychology and current research. Especially the topics dealt with in the Journal of Economic Psychology and papers published from 1981 to 2001give an overview of the diverse research areas and research topics in the field. Table 1 shows the content categories of publications.
Table 1: Research areas and topics in economic Psychology (Kirchler & Hölzl, 2006)
Theory and history (e.g., theoretical frameworks, life and work of scientist)
Choice and decision theory
Decision theory (e.g., decision making under risk, choice behaviour, preference formation)
Cooperation / Game theory
Socialization (e.g., lay theories, economic socialization)
Firm (e.g., firm behaviour, entrepreneurship)
Labour market (e.g., labour supply, work experiences, income and wage, unemployment)
Market-place (e.g., pricing, price competition)
Financial attitudes and behaviour
Household financial behaviour (e.g., saving, credit and loan, debts)
Money (e.g., money in general, euro)
Tax (e.g., tax attitudes, evasion)
Government and policy (e.g., welfare, growth and prosperity)
Marketing and advertisement
Economic and environmental psychology
At the ICAP Conference in Melbourne Tadeusz Tyszka gave a presidential address on “The role of moral sentiment in economic decision making”. We had two invited symposia on “Behavioral Finance” with presentations by Christine Roland-Lévy, Erik Hölzl, Tommy Gärling, David Leiser, Simon Kemp, and Erich Kirchler; and on “Decision making” with presentations by Tadeusz Tyszka, Dan Zakay, Katarzyna Domurat, Anna Macko, Tomasz Zaleśkiewicz). The invited speaker, Gerrit Antonides gave an excellent presentation on “Behavioral economics applied: Suggestions for policy making”. Additional symposia and presentations focused on psychological aspects of the current financial and economic crisis.
Division 9, Economic Psychology, is strongly related to IAREP and many economic psychologists are members of both organizations. The close relationship was, for example, demonstrated by the joint conference of IAAP Division 9 and IAREP in San Francisco, USA in 1998. In 2010 Division 9 members and IAREP members were also actively present at the ICAP Conference in Melbourne, Australia, at the IAREP/SABE Summer School in Moscow, Russia, which has successfully been organized by Elena Tougareva, and the IAREP/SABE/ICABEEP Annual Conference in Cologne, Germany, organized with high success by Detlef Fetchenhauer. When the next ICAP will take place in Paris, France, in 2014, IAREP might be willing to join in a common Division 9/IAREP event.
I am honoured and proud to have been given the possibility to chair Division 9 and would like to thank the former presidents who created and designed the work of the division: Fred van Raaij and Christine Roland-Lévy as well as the outgoing president, Tadeusz Tyszka. I am also very grateful to Tomasz Zaleskiewicz for his work as division secretary in the past and current presidential period. A very warm welcome is given to David Leiser from Ben Gurion University, Israel, as a new president elect.
Since the end of the Melbourne conference, Division 9 has the following officials:
President of Economic Psychology Division: Erich Kirchler
University of Vienna, Austria
Past President: Tadeusz Tyszka, Leon Kozminski University, Warsaw, Poland
President Elect: David Leiser, Ben Gurion University, Israel
Secretary: Tomasz Zaleskiewicz, Warsaw School of Social Sciences and Humanities Center for Research in Economic Psychology, Poland
Internet web page of Division 9: http://www.iaapsy.org/division9.
Finally, I would like to motivate all members of Division 9 to contribute to the further development of the division and of the field of economic psychology by sending information about their research projects, new books and publications, conferences and workshops, seminars, summer schools and other related activities to the Division 9 secretary, Tomasz Zaleskiewicz. Tomasz will take care to add your news to our homepage [firstname.lastname@example.org]. Your contributions will be essential to make the division visible to a larger audience and to establish a network of scholars working in the field.
President of Division 9 (2010-2014)
Kirchler, E. & Hölzl, E. (2003). Economic Psychology. International Review of Industrial and Organizational Psychology, 18, 29-80.
Kirchler, E. & Hölzl, E. (2006). Twenty-five years of the Journal of Economic Psychology (1981-2005): A report on the development of an interdisciplinary field of research. Journal of Economic Psychology, 27, 793-804.
This website has been designed to provide information about the most important aspects of Applied Economic Psychology. Here you will find useful information about research in Economic Psychology, forthcoming conferences, some of the highlights of past events, and information about our Division and IAAP.
This site also provides interesting resources including undergoing projects of Division 9, Publications, links to other related Professional Organizations.