Behavioural Economics: Implications for the Savings Literature by Andrew Coleman published by Matu (6/2011).
“In the last two decades, economics rediscovered its psychological roots. It now imports insights about the way people act from psychology at an enormous rate. The economics based on these insights, which is known as behavioral economics, is taught in most economics programs, and its practitioners include Nobel prize winners Daniel Kahneman, Thomas Schelling, George Akerlof, Vernon Smith, and Herbert Simon. A large body of detailed work exists, and several review articles and books have been written.
To date behavioural economics has been primarily empirical and microeconomic. Its approach has been to rigorously establish facts about the way people behave, and then build microeconomic models that incorporate these facts. The empirical work is typically based on experiments about how people behave when confronted with different economic situations, or on surveys about what people believe. These experiments are often played for monetary stakes, which are sometimes extraordinarily high. Increasingly, the results have been confirmed by neuroscientific investigations, involving tools such as functional magnetic resonance imaging and electroencephalograms (machines that trace the flow of electrical impulses and blood flow in the brain). These investigations show how the brain makes decisions, and how different decisions affect the brain. For instance, it has been shown that many people are motivated to cooperate on occasions when it is not in their direct interest because of the “brain pleasure” they get when they cooperate with people who have been cooperative with others.
The main focus of behavioural economics has been how individual agents make choices. These choices depend not only on their innate preferences over different goods and services but on their preferences over when they do things, their preferences over other peoples’ well-being, their attitudes towards risk, and the ways they evaluate probability and make judgements about the likelihood of different events…”
