ArgumentThe main contribution of the Alfred P. Sloan and Russell Sage Foundations' behavioral economics program (1984–1992) was not the resources it provided, which were relatively modest. Instead, the program's contribution lay in catalyzing “a sense of mission” in the collaboration between psychologists Daniel Kahneman and Amos Tversky, economist Richard Thaler, and their associates. Partly this reflected the common strategy of American foundations to pick an individual or small group of scientists and stick with them until scientific success had been achieved. (...) But moreover, it was a consequence of the careful management of the program's director Eric Wanner. The various actors involved in the behavioral economics program constructed a new behavioral economic sub-discipline in economics by tapping into existing missionary sentiments in the economic and psychological disciplines, while at the same time actively shaping this sense of mission. (shrink)

This article documents the history of the Allais paradox, and shows that underneath the many discussions of the various protagonists lay different, irreconcilable epistemological positions. Savage, like his mentor von Neumann and similar to economist Friedman, worked from an epistemology of generalized characterizations. Allais, on the other hand, like economists Samuelson and Baumol, started from an epistemology of exact descriptions in which every axiom was an empirical claim that could be refuted directly by observations. As a result, the two sides (...) failed to find a common ground. Only a few decades later was the now so-called Allais paradox rediscovered as an important precursor when a new behavioural economic subdiscipline started to adopt the epistemology of exact descriptions and its accompanying falsifications of rational choice theory. (shrink)