Behavioral economics
Behavioral Economics
Behavioral economics (pronunciation: /bɪˈheɪvjərəl iːkəˈnɒmɪks/) is a field of economics that studies the effects of psychological, cognitive, emotional, cultural and social factors on the economic decisions of individuals and institutions and how those decisions vary from those implied by classical theory.
Etymology
The term "behavioral economics" was first used in the late 20th century, although the integration of economics with psychology dates back to the late 19th and early 20th centuries. The term is derived from the English words "behavior", referring to the range of actions and mannerisms made by individuals, organisms, systems, or artificial entities in conjunction with themselves or their environment, and "economics", the social science that studies the production, distribution, and consumption of goods and services.
Related Terms
- Cognitive bias: Systematic errors in judgment and decision making common to all human beings which can be due to cognitive limitations, motivational factors, and adaptations to natural environments.
- Prospect theory: A theory in behavioral economics that describes the way people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are known.
- Nudge theory: A concept in behavioral science, political theory and economics which proposes positive reinforcement and indirect suggestions as ways to influence the behavior and decision making of groups or individuals.
- Heuristics: Simple, efficient rules, learned or hard-coded by evolutionary processes, that have been proposed to explain how people make decisions, come to judgments, and solve problems, typically when facing complex problems or incomplete information.
- Anchoring: A cognitive bias that describes the common human tendency to rely too heavily, or "anchor," on one trait or piece of information when making decisions.
- Framing effect: A cognitive bias where people decide on options based on whether the options are presented with positive or negative connotations; e.g. as a loss or as a gain.
- Loss aversion: The tendency for people to prefer avoiding losses to acquiring equivalent gains.
See Also
External links
- Medical encyclopedia article on Behavioral economics
- Wikipedia's article - Behavioral economics
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