This paper reviews recent literature that integrates economics and psychology, contrasting economists' views of rationality with psychologists' research on how expectations and actions are affected by problems of cognition. A subjectivist critique of "stimulus-response" approaches to psychology is presented. A discussion of the relevance of theories of motivation follows a review of literature on decision procedures used for evaluating alternatives in situations of complexity. The use of psychology in research on entrepreneurship, productivity, macroeconomic policy, and welfare and public sector economics is explored. The conclusion notes barriers to the general acceptance of a psychologically oriented approach to economics. Copyright 1990 by Royal Economic Society.