Behavioral Economics Concepts

2004

Behavioral economics increases the explanatory power of economics by providing it with more realistic psychological foundations. This book consists of representative recent articles in behavioral economics. 1 Chapter 1 is intended to provide an introduction to the approach and methods of behavioral economics, and to some of its major findings, applications, and promising new directions. It also seeks to fill some unavoidable gaps in the chapters' coverage of topics.

American Economic Review

Behavioral economics has become an important and integrated component of modern economics. Behavioral economists embrace the core principles of economics—optimization and equilibrium—and seek to develop and extend those ideas to make them more empirically accurate. Behavioral models assume that economic actors try to pick the best feasible option and those actors sometimes make mistakes. Behavioral ideas should be incorporated throughout the first-year undergraduate course. Instructors should also considering allocating a lecture (or more) to a focused discussion of behavioral concepts. We describe our approach to such a lecture, highlighting six modular principles and empirical examples that support them.

There are two reasons to go beyond Behavioral Economics. The first reason is that humans, as presented by this school, do not explain many critical economic problems. Behavioral Economics is not an alternative paradigm to traditional economics. It is only one of the New Schools of thought, that has risen due to the failure of the contemporary Neoclassical School to show that markets have a unique maximum welfare full employment equilibrium. Therefore, in order to delimit Behavioral Economics ́ contributions we need to look at the whole paradigm in economics, which today includes: the contemporary neoclassical paradigm plus all the New Schools of thought. The second reason is that humans, as described by Behavioral Economics, are not a good representation of mans ́ evolutionary characteristics. For Behavioral Economics, humans are emotional beings which often do not know what is best for them, and need the help of the government to make the choices which are truly convenient; and they display altruistic and social cooperative behavior, even in monetary transactions. But evolutionarily we are neither design to be emotional or rational, nor to be selfish or altruistic and socially cooperative. We are design to be flexible for survival purposes, and to display a wide range of behaviors.

The addition of “behavioral” to economics has given rise to a highly successful field of research. But, is it just a fashionable new trend or is it here to stay? More to the point, how does it differ from its close relative psychology? To answer these questions, the present article considers what behavioral economics is, and where it started, with the aim of trying to forecast what the status of it will be in the future. In forecasting where behavioral economics might be heading, the argument proposed here is that the best clues can be found in psychological research. If, as has been proposed here, behavioral economics partners research trends in psychology, then the futures of both will almost certainly be moving in the same direction. Both are beginning to, and will start to rely on online tools/mobile phone applications to collect richer data revealing dynamic tends over long time horizons, and as technology continues to facilitate ways of looking at group behaviour online, then larger scale studies examining interactions amongst multiple groups of people will become the norm rather than the exception. More specifically this article speculates on the future research focus of researchers in behavioral economics and the extent to which this will overlap with psychological research on judgment and decision-making.

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Universidade Nova de Lisboa, its faculty, program coordinators, and the administrative sta¤ for the encouraging research environment they created that resulted in this dissertation. I would also like to thank the participants of the conferences and seminars I attended. Financial supports from Fundação para a Ciência e a Tecnologia, Ph.D. fellowships under POCI 2010,

2020

The student author, whose presentation of the scholarship herein was approved by the program of study committee, is solely responsible for the content of this dissertation. The Graduate College will ensure this dissertation is globally accessible and will not permit alterations after a degree is conferred.

Journal of Economics, Finance And Management Studies

urpose – Existing literature has been reviewed on Behavioral economics to analyze the theoretical foundation. This paper aims to study the trend of publication. Based on the analysis further research agenda will be analyzed. Research Method – Bibliometric analysis of papers from the web of science database has been conducted. Comprehensive explorations of papers on behavioral economics have been done. Systematic literature reviews of a few papers were also conducted to get insights into the directions and content of the research. Different analytical tables of the web of science have been presented. Further Vosviewer has also been utilized to represent the trend with the help of map, bar, treemap visualization techniques.

If I had to summarize my thoughts about this book in a few words, I would say that it is not a typical one -but take this as a compliment. Due to its suggestive name, "The Making of Behavioral Economics", we might assume that we would be facing a well written and well-structured handbook about the discipline of behavioral economics. But after a few chapters and the first personal recollections, we have to realize that we had been fooled a little: this book is definitely not a handbook, but rather a good memoir. And what is more surprising at first is that it is a memoir about Richard A. Thaler's academic career and also the discipline of behavioral economics. The main focus of the book is to introduce the most important conceptions and findings of behavioral economics, but this is done from Thaler's perspective. We can follow his career advancement, from the point he started his PhD in economics to present days. We see how his early ideas -which were not taken seriously at the beginningdeveloped over time, and started to invade the traditional "economic" view of the world. We see through Thaler's eyes how a new discipline started to emerge -and also, how Thaler contributed to creating it -, and we can read about the milestones that were achieved by its early representatives.

SSRN Electronic Journal, 2000

For a research program that counts improved empirical realism among its primary goals, it is surprising that behavioral economics appears indistinguishable from neoclassical economics in its reliance on 'as-if ' arguments. ' As-if ' arguments are frequently put forward in behavioral economics to justify 'psychological' models that add new parameters to fit decision outcome data rather than specifying more realistic or empirically supported psychological processes that genuinely explain these data. Another striking similarity is that both behavioral and neoclassical research programs refer to a common set of axiomatic norms without subjecting them to empirical investigation. Notably missing is investigation of whether people who deviate from axiomatic rationality face economically significant losses. Despite producing prolific documentation of deviations from neoclassical norms, behavioral economics has produced almost no evidence that deviations are correlated with lower earnings, lower happiness, impaired health, inaccurate beliefs, or shorter lives. We argue for an alternative non-axiomatic approach to normative analysis focused on veridical descriptions of decision process and a matching principle -between behavioral strategies and the environments in which they are used -referred to as ecological rationality. To make behavioral economics, or psychology and economics, a more rigorously empirical science will require less effort spent extending 'as-if ' utility theory to account for biases and deviations, and substantially more careful observation of successful decision makers in their respective domains. B nomics with «more realistic assumptions» is perhaps the guiding theme of behavioral economists, as behavioral economists undertake economic analysis without one or more of the unbounded rationality assumptions. These assumptions, which count among the defining elements of the neoclassical, or rational choice, model, are: unbounded self-interest, unbounded willpower, and unbounded computational capacity.