Behavioral Economics

Behavioral economics and the related field, behavioral finance, study the effects of social, cognitive, and emotional factors on the economic decisions of individuals and institutions and the consequences for market prices, returns, and the resource allocation. The fields are primarily concerned with the bounds of rationality of economic agents. Behavioral models typically integrate insights from psychology with neo-classical economic theory. In so doing they cover a range of concepts, methods, and fields.

Behavioral analysts are not only concerned with the effects of market decisions but also with public choice, which describes another source of economic decisions with related biases towards promoting self-interest.

There are three themes which are prevalent in behavioral finances:

  • Heuristics: People often make decisions based on approximate rules of thumb and not strict logic.
  • Framing: The collection of anecdotes and stereotypes that make up the mental emotional filters individuals rely on to understand and respond to events.
  • Market inefficiencies: These include mis-pricings and non-rational decision making.
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Read more about Behavioral Economics:  History, Criticisms

Other articles related to "behavioral economics, economics, economic, behavioral":

List Of Unsolved Problems In Economics - Behavioral Economics
... Unified Models of Human Biases The majority of economics has concentrated on the development of models that reflect an idealized economic agent, sometimes referred ... such as herd behavior or momentum investing inconsistent with economic models that did not incorporate human psychological limitations ... debate as to whether it is necessary to incorporate such psychological limitations into economic models ...
Russell Sage Foundation - History - 1980s - Present
... The Foundation was an early force in the development of behavioral economics, launching the Behavioral Economics program in 1986 with the Alfred P ... A number of seminal books on behavioral economics published by Russell Sage remain key texts in the field today, including Quasi Rational Economics (1991) and ... In 1993, the Foundation also established the Behavioral Economics Roundtable, a group of leading behavioral economists elected by grantees in the program and charged to design initiatives to advance the field ...
Behavioral Finance - Criticisms
... Critics of behavioral economics typically stress the rationality of economic agents ... as prospect theory, are models of decision making, not generalized economic behavior, and are only applicable to the sort of once-off decision problems ... of the experimental and survey-based techniques which behavioral economics uses extensively ...

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