Behavioral Economics Combining Psychology & Economics.

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Behavioral Economics Combining Psychology & Economics.

Presentation transcript:

Behavioral Economics Combining Psychology & Economics

Rational Behavior? Traditional economics is based on the assumption that people make rational decisions where the MB ≥ MC 11 min. Rational Behavior Video http://video.pbs.org/video/1479100777 Start at 4:30 minutes…

Behavioral Economics Study of the social, cognitive & emotional factors which influence economic decisions making. Uses psychology to predict & test human behavior

Irrational Behavior?

Should Gov’t “nudge” people? Econs vs. Humans Areas to nudge people

BEHAVIORAL ECONOMICS Re-cap People often make irrational decisions But these irrational decisions are predictable People can be “nudged” to make better decisions (or worse!)

System 1 vs. System 2 Decision Making https://www.youtube.com/watch?v=KyM3d4gQGhM

Reading: The Truth about Relativity 1) World as it really is? http://danariely.com/videos/

Ted Video (17 minutes) http://www.ted.com/talks/dan_ariely_asks_are_we_in_control_of_our_own_decisions.html

16% 0% 84% 68% 32%

16% 0% 84% 68% 32%

Ted Video Recap Cognitive Physical Limitations vs. Limitations http://www.ted.com/talks/dan_ariely_asks_are_we_in_control_of_our_own_decisions.html

Behavioral Economics Recap We can’t compute the value of something alone We make decisions by comparing options We need context => everything is relative Our decisions change by what we compare We avoid hard comparisons=> we seek things that are easy to compare 4) We admit physical limitations but not cognitive limitations 5) Irrational behavior is predictable It occurs over & over again => we are robotic

Got Awareness? http://www.youtube.com/watch?v=Ahg6qcgoay4

AP Econ Course Review

Always someplace else? http://pulptastic.com/video-spreading-online-like-wildfire-see/

Is College Worth It? http://finance.yahoo.com/blogs/daily-ticker/the-real-reasons-the-high-cost-of-college-is-threatening-society--filmmaker-145424431.html