A belated post to acknowledge a welcome new volume, Economics and Psychology: Developments and Issues, published in July by MIT Press. Edited by the University of Zurich's Bruno S. Frey and University of Basel's Alois Stutzer, it appears to have a first rate selection of contributions. You can read the table of contents and download chapter one here.
The editors acknowledge in their introductory chapter the debt that economcs owes to psychology:
...together economics and psychology is a vibrant and fruitful ﬁeld. We have argued that psychology has had a strong impact on economics: it has helped to substitute the assumption of complete rationality by isolating anomalies in individual behavior; it has made experiments a valid and widely accepted method of research; it has broadened the view of human nature by showing pro-social, intrinsic, and procedural aspects in people’s preferences; and by showing that utility can be measured it has produced important knowledge about what people care for.
The danger that economics and psychology becomes an additional playground for exhibiting one’s mathematical prowess is perhaps smaller than in other areas because psychologists’ inﬂuence has from the very beginning introduced a strong empirical (experimental) orientation. We have argued that remarkable insights have already been reached but at the same time we are fully aware that in so many respects we still know so little. The ﬁeld is wide open for future research.
...the book under review is only in passing about the Kahneman-Tversky influence on decision theory. Rather, it focuses on a second wave of behavioral experiments involving strategic interaction (game theory) rather than single-agent choice (decision theory). Economists have been at the center of this new "behavioral game theory," which began with the famous ultimatum game experiment of Werner Gueth in 1982 (Guth, 1982). Indeed, except for Ralph Herwig, almost every contributor to this volume is trained in economics or business rather than psychology.
...Behavioral game theory has produced some quite notable results. Most important, researchers are corroborating what sociologists and social psychologists have known for a long time: human beings are not the self-regarding, asocial, materialistic creatures assumed in traditional economic theory under the rubric of homo economicus. Rather most laboratory and field subjects care about fairness and justice, and are willing to sacrifice material gain in the pursuit of normative goals. Moreover, most individuals have a more or less firm commitment to such character virtues as honesty, dependability, and trustworthiness, and are willing to forego some level of personal material reward in order to conform to the principles of virtuous conduct. More generally, people care about process as well as outcome in their interactions, so are more likely to contribute to a project that was democratically chosen rather than autocratically imposed, and their notions of fairness include such other-regarding elements as returning good for good and evil for evil.
The various contributors to this volume are almost all highly visible and creative leaders in their fields. The chapters are uniformly informative and well written. Several are illuminating in both reviewing the literature and providing an analysis of a single issue in journal article depth. Topics covered include prosocial behavior and trust in general, conditional cooperation and punishment, gender differences in trusting behavior, the neuroeconomics of decision-making, measuring subjective satisfaction and finding its causes, problems of self-control and time inconsistency, procedural utility, and recommendations for closer collaboration of psychologists and economists.