This paper reviews and assesses the application of Prospect Theory in economics over the past three decades. Initially introduced by Daniel Kahneman and Amos Tversky in 1979, Prospect Theory has been widely recognized as a compelling model for understanding how people evaluate risk in experimental settings. Despite its significance, the theory's practical application in economics has been challenging due to the lack of clear guidance on how to define gains and losses in various contexts. Recent research has made significant progress in addressing these challenges, incorporating Prospect Theory into traditional economic models and testing its predictions through empirical studies. The paper discusses several key areas where Prospect Theory has been applied, including finance, insurance, and consumption-savings decisions. In finance, Prospect Theory has been used to explain asset pricing puzzles, such as the equity premium puzzle, and to understand trading behavior, such as the disposition effect. In insurance, it has helped explain why households choose higher deductibles and why annuities are unpopular. In consumption-savings decisions, Prospect Theory has provided insights into why individuals save more in anticipation of future income uncertainty and why they tend to overconsume. The author concludes that while it is too early to declare a definitive success, the rapid progress in recent years suggests that Prospect Theory's insights will eventually find a permanent and significant place in mainstream economic analysis.This paper reviews and assesses the application of Prospect Theory in economics over the past three decades. Initially introduced by Daniel Kahneman and Amos Tversky in 1979, Prospect Theory has been widely recognized as a compelling model for understanding how people evaluate risk in experimental settings. Despite its significance, the theory's practical application in economics has been challenging due to the lack of clear guidance on how to define gains and losses in various contexts. Recent research has made significant progress in addressing these challenges, incorporating Prospect Theory into traditional economic models and testing its predictions through empirical studies. The paper discusses several key areas where Prospect Theory has been applied, including finance, insurance, and consumption-savings decisions. In finance, Prospect Theory has been used to explain asset pricing puzzles, such as the equity premium puzzle, and to understand trading behavior, such as the disposition effect. In insurance, it has helped explain why households choose higher deductibles and why annuities are unpopular. In consumption-savings decisions, Prospect Theory has provided insights into why individuals save more in anticipation of future income uncertainty and why they tend to overconsume. The author concludes that while it is too early to declare a definitive success, the rapid progress in recent years suggests that Prospect Theory's insights will eventually find a permanent and significant place in mainstream economic analysis.