the relationship between economics and psychology?

Because economic decisions are based not only on "rational" calculations but also on people reactions and anticipations. In the case of economics this relates to consumers, workers, investors, entrepreneurs, but also corporate and government decisions.

It is essential, in economic analyses, to see how * emotions (the famous greed and fear, but also "the affect" in general, and this includes mimicry), * habits, modes of thinking ("heuristics"), * selective attention / representation (stereotypes), * memory distortions, and also logical fallacies contribute to the economic uncertainty

Without including psychological factors in its reasonings, economics can not really describe how the economy works. For example to understand bubbles is not just to detect economic imbalances by comparing a few statistics, but also to understand how crazes get born. Psychology (underreaction / overreaction), and more specifically Social psychology (the role played by mimicry / groupthink for example) are crucial.

That is why Behavioral Economics (at the origin Behavioral Finance) became a crucial academic field in economics. Its findings are also applied to other social science areas (politics for example)

What is the relationship between Sociology and Economics?

Ajay Bhatt

Sociology and Economics as social sciences have close relations. Relationship between the two is so close that one is often treated as the branch of the other, because society is greatly influenced by economic factors, and economic processes are largely determined by the environment of the society.

Economics deals with the economic activities of man. It deals with production, consumption and distribution of wealth. The economic factors play a vital role in the very aspect of our social life. Total development of individual depends very much on economic factors. Without economic conditions, the study of society is quite impossible. All the social problems are directly

connected with the economic conditions of the people. That is why Marshall defines Economics as "on one side the study of wealth and on the other and more important side a part of the study of man."

In the same way Economics is influenced by Sociology. Without the social background the study of Economics is quite impossible. Sociologists have contributed to the study of different aspects of economic organisation. Property system, division of labour, occupations etc. are provided by a sociologist to an economist.

The area of co-operation between Sociology and Economics is widening. Economists are more and more making use of the sociological concepts in the study of economic problems. Economists are working with the sociologists in their study of the problems of economic development in underdeveloped countries. Combined efforts of both the experts may be of great practical help in meeting the challenges.

How is anthropology related to economics?

Both involve the study of human action.

Anthropology tends to look at *differences* between cultures.

Economics looks for universally true statements about human action. It looks for the rational principles which explain regularities in the sequence and interrelationships of human and social actions.

Economics is beneficial for anthropology because it explains the logical principles that underlie all human society. For example, economics tells us that labour in co-operation is more productive than labour in isolation. This basic fact of economics explains the reason why humans form themselves into societies. If they didn't get any benefit out of it, at the margins of subsistence, over many long ages, the people who were more social would have died out out, and the people who were less social would have prospered. The reason we didn't evolve to be a solitary species like the snow leopard, but a very highly social species, with the highest degree of division of labour of any species, and the highest level of material wealth, is explained by economics.

Once we understand the principles of economics, we know what we're looking at in anthropology and can understand it better.

Anthropology benefits economics by giving examples and histories of how different people have answered the same challenges of economics: how to survive, how to get food with limited resources, the benefits of co-operation, and so on.