Jeremy Bentham, 'The Psychology of Economic Man', and Behavioural Economics

Section 1 briefly reviews first the received interpretation of Bentham, which sees him as having had little to do with the development of economics (excepting some passing mentions which recognize his deployment of the concept of utility or his reduction of human motivation to self-interest, and perhaps a note on his discussion of the concept of diminishing marginal utility); and second, the manner in which he applies his concept of rationality to political economy. In section 2, the central thesis of the paper is presented: It is argued that an examination of his insights into the psychology of individual choice supplies good reasons to identify him as an intellectual godfather of behavioural economics. In keeping with the normativity of his concept of rationality, Bentham would maintain that the way in which traditional economics continues to ignore the gulf between its model of human decision-making and the facts of human psychology weakens its usefulness both as a science and as a guide to public policy. Bentham anticipated several modifications to the standard model (for instance loss aversion, the endowment effect, reference dependence, framing, the desire for cognitive ease, and status-quo bias) which have been introduced later by behavioural economics. Section 3 introduces two problems concerning the normativity of economics, the first of which, at least for Bentham, rests upon a false premise, while his substantive notion of rationality insulates him against the second