The Calculus of Desire

In the first half of the eighteenth century, Daniel Bernoulli introduced a major innovation in the study of decision-making. In many respects, his key ideas anticipated Fechner’s Law of sensation in the domain of economic decisions. The problem of measuring sensations is thus entwined with that of measuring motivations for economic choices. Bernoulli’s original insights developed into modern theories of judgement and decision-making. Inspired by several features of psychophysical models, Nobel Prize winner Daniel Kahneman developed Prospect Theory, effectively turning Weber’s and Fechner’s original intuitions into a law of desire.