The Beginnings of Behavioral Economics: Katona, Simon, and Leibensteins X-Efficiency Theory

The Beginnings of Behavioral Economics: Katona, Simon, and Leibenstein's X-Efficiency Theory explores the mid-20th century roots of behavioral economics, placing the origin of this now-dominant approach to economic theory many years before the groundbreaking 1979 work on prospect theory by Daniel Kahneman and Amos Tversky. It discusses the work of Harvey Leibenstein, Herbert Simon, George Katona, and Frederick Hayek, reintroducing their contributions as founding pillars of the behavioral approach. It concentrates on the work of Leibenstein, reviewing his nuanced introduction of X-efficiency theory. Building from these foundations, the work explores the body of empirical research on market power and firm behavior – XE relationship.

This book is a tremendous resource for graduate students and early career researchers in behavioral economics, experimental economics, organizational economics, social and organizational psychology, labor market economics and public policy.

Reviews the powerful, but neglected contributions of mid-20th century scholars, like Leibenstein and Katona in building the roots of behavioral economic theoryAmalgamates and reviews 50 years of empirical research and over 200 empirical papers on X-efficiency theoryEstablishes how X-efficiency can aid modern behavioral economics in further developing firm theory and understanding efficiency wages

1. Introduction
2. Two beginnings
3. The “Big 3.” Simon, Katona, Leibenstein
4. It didn’t just happen overnight
5. Leibenstein before X-efficiency theory
6. X-efficiency. An intervening variable
7. Empirical research on XE: c.1967–1990
8. XE among US financial institutions
9. XE among financial firms in Asia
10. XE among Asian non-financial institutions
11. XE in Europe
12. XE in Australia and New Zealand, Latin America, the Middle East, Africa, and the world
13. Conclusions