nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2025–09–29
four papers chosen by
Erik Thomson, University of Manitoba


  1. The economic style of reasoning is not value-neutral! An interview with Elizabeth Popp Berman By Andersen, Ditte
  2. Why are there financial crises? Recent developments in theory By Kondor, Péter
  3. Behavioral Biases and Financial Decisions: A Systematic Review and Bibliometric Analysis of the Transition from Classical Theory to Behavioral Finance By Chaimaa Laamime; Karima Mialed
  4. Identity as Self-Image By Roland Bénabou; Luca Henkel

  1. By: Andersen, Ditte
    Abstract: As part of Acta Sociologica’s special issue on ‘Social investment in Action’ we bring an interview with Professor Elizabeth Popp Berman (EPB), author of the widely acclaimed Thinking like an Economist – How Efficiency Replaced Equality in US Public Policy (Princeton University Press, 2022) . Interviewer, Ditte Andersen (DA), probes Berman’s argument on how the economic style of reasoning is linked to specific values, especially the value of efficiency, in ways that crowd out other values (e.g. democratic participation, universal rights) and constrain social policy thinking in contemporary Western societies. Social investment policies epitomize the economic style of reasoning by orientating towards returns of public spending. In policy domains such as education, ‘social investment in action’ forefronts the value of returns (in the future) rather than, for example, the value of equality and universalism (in the present). The interview also turns attention to the role of sociologists in denaturalizing the taken for granted and aid the imagination of alternative futures.
    Date: 2025–09–08
    URL: https://d.repec.org/n?u=RePEc:osf:socarx:j38dt_v1
  2. By: Kondor, Péter
    Abstract: In financial crises, a period of overheated credit markets turns into a credit crunch accompanied by a systemic breakdown in the financial intermediary sector. Without a deep understanding of their roots, designing policies to decrease the probability of suffering from them or to avoid the worst consequences is like flying blind. In this review, I survey the recent development of the theory of financial crises. I focus on the answers these theories provide to four fundamental questions. What makes the booming phase fragile, and what are the incentives and frictions leading to that fragility? What triggers the crisis? Why is the downturn persistent? Should policy intervene, and if so, how?
    Keywords: financial crises; overheated credit markets; credit crunch
    JEL: E32 E44 G28
    Date: 2025–08–06
    URL: https://d.repec.org/n?u=RePEc:ehl:lserod:129142
  3. By: Chaimaa Laamime (Université Hassan II de Casablanca, ENCG Casablanca, Ain Sebaâ); Karima Mialed (Université Hassan II de Casablanca, ENCG Casablanca, Ain Sebaâ)
    Abstract: This paper examines the conceptual evolution of financial decision-making models, highlighting the transition from traditional economic theories to the behavioural perspective. Foundational frameworks such as the Efficient Market Hypothesis (EMH) and Modern Portfolio Theory (MPT) are built on assumptions of perfect rationality and information symmetry in markets. However, these models fall short in accounting for the erratic and often illogical decisions observed among investors.As a response to these theoretical shortcomings, behavioural finance has gained prominence by integrating psychological dimensions into the analysis of financial actions. This work conducts a systematic review of recent academic contributions focused on behavioural biases that influence individual financial behaviour, asset pricing mechanisms, and investment outcomes.The study identifies a notable academic shift—from macro-level theories of market functioning to a growing focus on micro-level investor cognition. This shift is also reflected in the increasing volume of research investigating how mental shortcuts and emotional reactions shape financial choices.The findings suggest that incorporating behavioural insights is essential for designing more effective investment strategies and risk assessment tools. Furthermore, this approach offers a promising path toward understanding persistent market anomalies and contributes to the development of a more realistic theory of investor behaviour.
    Abstract: Le présent article intitule une analyse approfondie de l'évolution des théories relatives à la prise de décision financière au marché financier tout en mettant l'accent sur la finance classique et l'apparition de la finance comportementale. Les théories de la finance classique notamment l'hypothèse d'efficience des marchés et la théorie moderne du portefeuille, reposent sur la rationalité des investisseurs et l'efficience informationnelle des marchés. Cependant, ces théories étaient l'objet de nombreuses critiques mettant en avant la nécessité de prendre en compte les comportements irrationnels des investisseurs individuels sur les marchés financiers. Ces critiques ont provoqué l'émergence de la finance comportementale en comblant ces lacunes en intégrant la psychologie dans l'analyse des décisions financières. Cet article propose une revue systématique de la littérature portant sur les biais comportementaux qui impactent la prise de décision financière. Cette analyse met en avant les limitations cognitives et psychologiques influençant la formation des prix des actifs financiers, les stratégies d'investissements ainsi que les rendements boursiers. Cette étude observe un glissement de l'intérêt académique passant de l'analyse des résultats centrées sur les dynamiques globales des marchés à une focalisation accrue sur l'étude des comportements individuels des investisseurs, accompagné d'une augmentation notable du nombre de publications consacrées à ce sujet. La recherche conclut que la compréhension des biais comportementaux des investisseurs est un levier fondamental pour l'élaboration des stratégies efficaces de gestion des risques et la conception des recommandations d'investissements pertinentes, favorisant une amélioration de la performance des marchés. Les résultats soulignent le rôle croissant de la finance comportementale dans l'explication du comportement des investisseurs et des anomalies de marchés tout en identifiant des pistes prometteuses à de nouvelles perspectives de recherche dans un champ en plein évolution.
    Keywords: behavioural biases, financial rationality, investor personality, classical financial theories, investment decision-making, Behavioural finance, rationalité en finance, personnalité de l'investisseur, théories classiques de la finance, biais comportementaux, prise de décision en investissement, Finance comportementale
    Date: 2025–08–27
    URL: https://d.repec.org/n?u=RePEc:hal:journl:hal-05226053
  4. By: Roland Bénabou; Luca Henkel
    Abstract: We review the economic literature on self-image, which conceptualizes identity as a set of beliefs about one’s core traits, values, goals, and social ties. Self-image concerns lead individuals to process information and make choices in non-standard ways that help affirm and protect certain valued identities. We first present the main cognitive mechanisms involved within a simple unifying framework. We then survey the extensive laboratory, online, and field experimental literature on the nature and behavioral implications of self-image concerns. We discuss in particular how they give rise to information and decision avoidance, motivated memory and beliefs, excuse-driven behavior, preferences for truth-telling, hypothetical bias, moral cleansing and moral licensing, collective identities, political preferences, and other forms of self-signaling or self-deception. We subsequently discuss common empirical strategies used to identify self-image concerns, as well as the threats to their validity and how to alleviate them. We conclude by outlining open questions and directions for future research on the belief-based approach to identity.
    Keywords: self-image, identity, motivated beliefs, belief-based utility, behavioral economics, experimental economics
    JEL: D01 D91 C90
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:ces:ceswps:_12147

This nep-hpe issue is ©2025 by Erik Thomson. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at https://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.