1 - Introduction

Abstract

This book argues that there were two beginnings of behavioral economics. The first beginning started in the 1940s and was led with the works of George Katona, Herbert Simon, Harvey Leibenstein, and others. The second, the one that truly revolutionized (behavioral) economics, was led by Kahneman, Tversky, Thaler, and George Akerlof. These two groups are the “old” and “new” behavioral economics, respectively. Or, if you prefer, the first-generation behavioral economics and the generations, which came after. This book will try to show the relationship between these two beginnings and groups, their important similarities, and their obvious differences. There are separate chapters on the work of the “Big 3,” Katona, Simon, and Leibenstein, and; another on other first-generation behavioral economics. There are two chapters on Leibenstein’s research, one that covers the period 1950 to 1960, and the other on his 1966 seminal article on X-efficiency theory. There are then six chapters on the approximately 200 empirical studies on X-efficiency theory using evidence in every continent and many industries. The average level of X-inefficiency worldwide is approximately 20%. The final chapter summarizes the chapters.