“[Psychology and economics] is a very, very new thing, and our department is at the forefront,” says Alesina.

Mullainathan, a MacArthur “genius” grant recipient who taught at MIT for five years and offers his first courses at Harvard this semester, teaches Economics 1035, “Policy Applications of Psychology and Economics,” which enrolled over 70 undergraduates, as well as several graduate seminars.

An economics professor at Berkeley and another MacArthur grant recipient, Rabin, who was a visiting professor at Harvard last year, has just received an offer of tenure from the Economics Department.

Rabin, who also received the John Bates Clark Medal, specializes in microeconomics, game theory, and psychology and economics. He could not be reached for comment.

Mullainathan has joined a contingent of three Economics Department professors, David I. Laibson ’88, Jeremy C. Stein, and Nicola Fuchs-Schuendeln, whose research interests involve psychology and economics, a field in economics that is still relatively new.

The psychological dimension of economics is “an area that wasn’t really on the map at all twenty years ago,” and it “has become a very active and very dynamic part of the intellectual landscape,” says Laibson, who teaches Economics 1030, as well as Economics 2030, “Psychology and Economics,” with Mullainathan.

“I think the subject is really thriving. It’s almost trendy,” says Xu.

The new field factors in “a psychologically interesting individual who is largely self-interested and largely rational, but who at the same time cares a great deal about their social interactions, and about others, and who sometimes makes errors in their decisions, and who sometimes suffers from self-control problems,” Laibson says.

SOCIAL IMPLICATIONS

Mullainathan, who was born in India and lived there until he was seven years old, has focused much of his research on using behavioral economics to improve the quality of life in developing countries and poor communities in the United States.

He spent two and a half weeks in India in January, researching the use of Internet kiosks as bank accounts in rural areas.

In his work, Mullainathan has collaborated frequently with NGO’s and small, local companies, rather than under the auspices of governments.

“Sometimes there’s a lot more freedom working with NGO’s and companies than working with the government, especially in developing countries,” he says.

He has also conducted research with the Center for Economic Progress, based in Chicago, to help the very poor set up bank accounts, so as to “get poor people to better manage their money” through psychological and economic incentives.

“Sendhil [Mullainathan] has a brilliant ability to identify genius tests of important social phenomenon,” says Laibson, who described Mullainathan’s most current research in the psychological effect of marketing as “remarkable.”