A brief introduction to behavioral economics

A brief introduction to behavioral economics -

The study of human behavior that has come under the traditional umbrella of psychology, little relationship with the economy seems to have.

But as we learn more about how the brain works through the dual disciplines of neuroscience and psychology, there is an increasing marriage to the field of business, in order to better understand how people make financial decisions to to meet.

This has developed in recent years and is an emergent field that deserves a brief introduction and explanation.

The traditional view of the economy and financial decisions

It is sometimes forgotten in the economy, that the field on the human behavior should be when financial decisions to make.

is the traditional view of economists that the world populated by sober, logical decision-makers who always think rationally to draw their conclusions. This view is underpinned by the understanding that human behavior shows three important characteristics :. Unlimited rationality unlimited willpower and unlimited selfishness

This has given the findings of cognitive and social psychologists ever flown, the assumptions made as far back as this question in the 1950s.

With the rise of behavioral neuroscience since the 1980s (especially Kahneman work) provide more insight into the workings of the brain, we are now safer than ever about the role that emotions and bias plays in all decisions. wearing of simple day-to-day decisions, such as the dress, to larger decisions that may affect many people

arrogance and optimism are two examples of behavioral characteristics that may result in suboptimal financial decisions and detract from the traditional model used. People have also has bad decisions to make , even if they know it. Not the best , due to lack of self-control

So that's where behavioral economics has shown many of the beliefs of traditional economic view of step and change

What is behavioral economics.? - And how it can help

behavioral economics and behavioral finance study the impact of psychological, social, cognitive and emotional factors in economic decisions.

This may apply to persons or institutions, and includes the impact on market prices, dividends and allocation of resources search.

described by the three traits of human behavior in the traditional model above include, unlimited rationality has received special focus, has a new understanding in the field of neuroscience result.

better understand how people can get in financial decisions will help in many areas: from the personal finances to organizations products and try to get the design of customer sign-ups; , And on the whims of trading to governments and how they formulate the finance laws

Perhaps behavioral economics can in future help people to make better decisions in order to secure their financial future; it may even have helped if more attention were paid to them in the lead up to the global financial crisis in 2008