Traditional ecomic and financial theory is being challenged because rmative, prescriptive models derived from it are t predicting the behavior of successful producers, investors, or consumers as well as anticipated. Ecomists and psychologists are documenting amalies at the individual level, in financial markets, and in natural ecomic settings. This opens the larger question of the importance of psychological, sociological, and other phemena for financial and ecomic behavior. It even raises the issue of what ecomic rationality really is. This book surveys and examines the increasing evidence of ecomic amalies. It argues for an eventual, comprehensive behavioral framework for ecomics and finance, but in the interim, indicates how the tendency to use rules of thumb might be taken into account to improve predictions about decision making. The book is aimed at those, including business executives and students, with intermediate-level preparation in ecomics or finance. Part I, however, is accessible to those with only an introductory course. Part II should prove useful to professionals in ecomics and finance who seek a solid introduction to this area. The presentation speculates about possible applications of a behavioral analysis to past and present public policy issues. It closes with guidelines for decision making that suggest how, in the absence of a comprehensive behavioral theory of ecomics and finance, to improve prediction about decision making by taking into account the heuristics, or rules of thumb, used by decision makers and the biases that those heuristics involve.
HUGH SCHWARTZ is Visiting Professor he Department of Economics at the Federal University of Parana in Brazil./e He has taught at the University of Kansas, Yale University, and Case Western Reserve University and served as a Senior Economist at the Inter-American Development Bank. He left the bank to devote more time to the interrelationship between psychology and economics, particularly with respect to entrepreneurial decision makers.