A long-time friend and colleague valued for many reasons, not the least of which is the expansive range of his scholarly interests, writes:

“I often get lost in the soup of new economic titles that try to capture the behavioral side of economics, an area that has languished until recently. Books on neuroeconomics, behavioral economics, economic sociology, game theory, behavioral finance, hedonic psychology, intertemporal choice, and other such juicy domains have proliferated to a point that I cannot keep up with the reviews, let alone read all of the texts.”

For several days after receiving his note, I was in and out of a funk. If this guy—I mean, he says he’s read 600 books in preparation for finishing his doctoral dissertation—is having that much trouble staying up with today’s explosion of knowledge in fields that any decent “cutting edge”-oriented management theorist should have passing knowledge of, then what hope is there for the rest of us?

But, several days’ funk is enough. Let’s at least get more familiar with some of the more unfamiliar terms in his list:

Hedonic psychology. According to the American Psychological Association’s Observer, this is the study of pleasure and pain, happiness and misery, both as they are experienced in the present and as they are remembered later. A key researcher here is Dr. Daniel Kahneman, professor of psychology and public affairs at Princeton University. For more on Kahneman and hedonic psychology, go here: “Memory vs. Experience: Happiness is Relative”

Economic sociology. Wikipedia, the free encyclopedia, defines this field of inquiry as “the sociological analysis of economic phenomena…. Current economic sociology focuses particularly on the social consequences of economic exchanges, the social meanings they involve and the social interactions they facilitate or obstruct. Influential figures in modern economic sociology include Mark Granovetter, Harrison White, Richard Swedberg and Viviana Zelizer. To this may be added Amitai Etzioni, who has popularised the idea of socioeconomics, and Chuck Sabel and Wolfgang Streeck, who work in the tradition of political economy/sociology.” For more, go here: “Economic sociology”

Intertemporal choice. To put it simply, as an economics instructor at the University of Pennsylvania has, “Life is full of intertemporal choices: should I study for my test today or tomorrow, should I save or should I consume now?” Letting Wikipedia weigh in again: “Intertemporal choice is the study of the relative value people assign to two or more payoffs at different points in time. This relationship is usually simplified to today and some future date.” For a fascinating brain-studies-oriented discussion of “ic,” go here: “Is There A Neurobiology of Intertemporal Choice?”

Behavioral economics. InvestorHome Web site observes, “Much of economic and financial theory is based on the notion that individuals act rationally and consider all available information in the decision-making process. However, researchers have uncovered a surprisingly large amount of evidence that this is frequently not the case…. A field known as ‘behavioral finance’ has evolved that attempts to better understand and explain how emotions and cognitive errors influence investors and the decision-making process….As an example, some believe that the outperformance of value investing results from investor’s irrational overconfidence in exciting growth companies and from the fact that investors generate pleasure and pride from owning growth stocks. Many researchers (not all) believe that these humans flaws are consistent, predictable, and can be exploited for profit.” “Applied Behavioral Finance: An Introduction”

Maybe a worthy perspective on the subject matter of all the above fields of inquiry and other contemporary scholarly endeavors along these lines is provided by two quotes from the article referenced immediately above:

• “Recently we worked on a project that involved users rating their experience with a computer. When we had the computer the users had worked with ask for an evaluation of its performance, the responses tended to be positive. But when we had a second computer ask the same people to evaluate their encounters with the first machine, the people were significantly more critical. Their reluctance to criticize the first computer ‘face to face’ suggested they didn’t want to hurt its feelings, even though they knew it was only a machine.”—Bill Gates in The Road Ahead

• “Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.”—Albert Einstein

The above commentary has appeared in a blog on another of my websites. I’m choosing to recycle it here because I think the points it makes are important.

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