Hi Pavlo,

Machlup himself was greatly influenced by other Austrian economists such as Schumpeter (who explained entrepreneurship psycologically rather than with the profit motive), and a generation before Menger and Böhm-Bawerk, who all were very critical of the "homo oeconomicus" concept used by Fisher, Pareto, Marshall and other members of the "marginal revolution". 

Dear Prof. Illiashenko,

                                       I think it is wrong to say (you have not said that or anybody in this set of answers) that behavioural economics is anti utilitarian economics in any way. There are so many classical experiments like the St. Petersberg Paradox or the Paradox of Thrift which are there in Hal Varian's Microeconomic Analysis textbook which throw light on various ways in which utility or expected utility theory can be made to deal with various extended definitions of rationality most of them dealing with money metric utility. So I would say behavioural economics started as early as economics itself but sophisticated modelling progressed along with it. My PhD thesis at NYU was partially devoted to this integration of models (Bounded Rationality in the Simon-Radner-Rothschild model with VNM Expected Utility extended to the Arrow Debreu models => QF =>later extended in research to Computation Physics - vide Research Gate website). One new implication is that the Value Function in the sense of Debreu's Valuation Equilibrium is derived to be similar to the Shannon Entropy measure of Thermodynamics with logarithmic utility, utility fields, learning and signal processing on utility and wealth states and time, of course Tychonoff Products of Lagrangean generating field interaction across Functor Category Ffields for Systems Integration.

SKM for SKM, NH and SM

Let me reveal some insider information. Since I have been fortunate enough to study at New York University's Economics Department between 1988-1993 and between 1986-1988 at Columbia University the seat of the famous Manhattan Project of Physics I carry some intellectual legacy I can claim. I don't want to elaborate on Columbia University now because it is not as if scientists cannot be part of legacies in other ways. Vut in terms of NYU I did study under Professors like Andrew Schotter, who was also on my PhD committee and who happened to be a student of Oscar Morgenstern. I have learnt that Institutional Economics of which Professor Schotter has published a substantial amount of Research himself is a methodology in the Games and Economic Behaviour debate which certainly provides an alternative explanation for the existence of traffic rules for e.g. by using Normal Form Games and does away with any utilitarian requirements. But at the same time it was VNM who formalised the Expected Utility Theory. So looks like Profs. Schotter, Prof. Wilson, Prof. Weigelt, Prof. Radner and others who have worked in this tradition have ripped the collboration of VNM apart to some extent. Only kidding! Reagrds to you and to them , they are all my Professors.

SKM for SKM, NH, SM

I second Neelem Rani on the formal origin of BE corresponding to the joint work of Kahneman, Tversky and Thaler. Before that, I think one should refer to Cognitive Psychology, to Herbert Simon and to the Behavioral Decision Research program.

Of course, the Lester-Machlup debate was a crucial step in the XXth century history of economics, due to its criticism of  the rationality axiom, a step that is worth investigating. Likewise, however, there are many other important critiques, Amartya Sen being the author of one of these.

Erik Angner and George Loewenstein have an interesting paper on the origins of BE in a book of readings that was organized by U. Maki, Handbook of the philosophy of science. Elsevier.  

Behavioral Economics are based on the self-interest-hypothesis and therefore root in the work of Adam Smith, who wrote:

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

I always try to get in touch with Behavioral Economists and they invited me to Zurich last December:

It's difficult because they - like other Economists - do not appreciate dialogue.  Maybe they feel like an Avantgarde being closer to the truth. Sectarian even. Recently a scholar found out that almost all their experiments (such as win/lose and trust games) happened with Western students only.

They remind me at French Communists in the 1960s who tried to save the Communist idea such as the behaviorists the rational axiom.

I would be interested in learning how they interpret the alleged 'elections' in the US where nobody has any choice but the donors of two corrupt candidates and the media controlled by them.

http://de.slideshare.net/Zurich_Behavioral_Economics_Network/dr-alexander-dill-was-hat-sozialkapital-mit-verhaltenskonomie-zu-tun-zurich-behavioral-economics-network