Understanding Behavioral Economics

Understanding Behavioral Economics

Behavioral economics uses an understanding of human psychology to account for why people deviate from rational action when they’re making decisions. Traditional economics takes for granted that people have unlimited resources and time and always end up making the rational choice. American economist and cognitive psychologist Herbert A. Simon came up with the theory of bounded rationality, which explains how people’s rationality is limited by the timeframe, by their cognitive resources, and by the difficulty level of the decision. Simon said that decision-makers frequently act as satisficers, seeking a satisfactory solution instead of an optimal one. Nobel Prize-winning cognitive psychologist Daniel Kahneman (who also came up with fast and slow thinking systems) and Amos Tversky developed prospect theory, which shows how irrational decision-making is informed by clinical psychology. Prospect theory has two stages: an editing stage, where heuristics or mental shortcuts are applied in risky situations, and an evaluation stage,... Read more

The Art of Decision-Making

The Art of Decision-Making

Chocolate or strawberry? Life or death? We make some choices quickly and automatically, relying on mental shortcuts our brains have developed over the years to guide us in the best course of action. Understanding strategies such as maximizing vs. satisficing, fast versus slow thinking, and factors such as risk tolerance and choice overload, can lead to better outcomes. When making a decision, we form opinions and choose actions via mental processes which are influenced by biases, reason, emotions, and memories. The simple act of deciding supports the notion that we have free will. We weigh the benefits and costs of our choice, and then we cope with the consequences. Factors that limit the ability to make good decisions include missing or incomplete information, urgent deadlines, and limited physical or emotional resources. When people are put in a familiar situation, their decisions are often fast and automatic, based on longtime experience... Read more

Do You Need What You Think You Need?

Do You Need What You Think You Need?

Do you ever wonder why you invest your time, money, or energy where you do? Like the clever song by Christine Lavin and The Four Bitchin Babes, do you ever wonder, “What was I thinking?” (The song is fun; consult your music source). There is a good chance that you were not thinking at all, that you were acting from impulses, whether generated from internal needs , states or events, or external ones. Why might we want something we do not need? The most straightforward response is that we think it might meet a need. For example, we may want to feel healthy. Some expert or media release or comment from a person you admire and/or respect might recommend x, y, or z as a shortcut to feeling healthy. You know in your gut that few solutions– products, activities, habits–could help as much as shedding the extra twenty pounds gained... Read more

Easy Video Reviews

{{startingCount}}
{{time(finishingCount)}}
{{trans(`You have no camera installed on your device or the device is currently being used by other application`)}}
{{trans(`Please try visiting this page with a valid SSL certificate`)}}
{{trans(`You can record up to %s minutes, don't worry you will review your video before sending`, time(preference.limits))}}
{{trans('Seconds')}}
{{trans(`You can record up to %s minutes, don't worry you will review your video before sending`, time(preference.limits))}}
{{trans('Uploading video...')}}
{{send.message}}

{{trans('Upload video')}}

{{trans('Drag your files here or click in this area')}}
{{uploader.file}} {{uploader.size}} x
English