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Relationship Between Economics And Psychology

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Introduction
The assumption that economics and psychology are directly related disciplines rests upon various inferences made during the last decades and advanced by famous researchers such as Daniel Kahneman, W. Brian Arthur, Hugo Münsterberg, George Katona or Günther Schmölders. Although the perception today is that both fields are closely related, throughout history, the homogeneity between economics and psychology was not adequately elaborated. The challenge to introduce psychological concepts into economics appeared to be difficult and it was even more daunting 30 years ago, (Kahneman, 2003). Up to the present time, both disciplines have borrowed concepts from each other and tried to contribute to the improvement of theories developed …show more content…
Psychology is a discipline that acts based on the application of various concepts for establishing new procedures that can defeat complications of individuals in their every-day life (Christine Roland Levy, 2009). This includes mental health and various diseases, the area of education and development of knowledge, politics, and law, business management, clinical psychology, sports psychology, or community psychology (Christine Roland Levy, 2009). Economics, on the other hand, is about what individuals do (Krugman, 1996), particularly “is the study of economies, at both the level of individuals and of society as a whole” (Krugman, 2004). Certainly, the relationship can be traced to the evidence that both disciplines are social sciences, which indicates that their focus relies on society and on the relationship between individuals within a …show more content…
That is the concept of validity. In the context of economic experimentation, validity stands for the accuracy of a scientific operation, in the process of preparing measurements, and when conducting experiments (Heukelom, 2011). Validity was first introduced by psychologist and it was scientifically defined in the early 20th century given the background of psychological tests (Heukelom, 2011). It traveled in the late 1980s and early 1990s to economics with the purpose of convincing the doubtful audience that performing experiments in economics do indeed represent the reality (Heukelom, 2011). Economists like (Smith, 1962) and (Plott, 1982) were reluctant to adopt this concept because they believed that the laboratory markets are indeed real markets as the participants must look for real profits and they must respect real rules (Heukelom, 2011). Certainly, the economists did not want to create a division between an inside market made in the laboratory and the real market made outside of the laboratory (Heukelom, 2011). Essentially, they tried to approach the agents from one

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