Chapter 1
Decoding Behavioral Economics
In This Chapter
Understanding the importance of assumptions for economic analysis
Looking at how real people make choices in the real world
Identifying the non-monetary variables that grow the economic pie
Blowing bubbles and weathering bumps
Seeing what makes people happy
Behavioral economics is all about developing economic analyses for real people in the real world. It’s about making economic models more robust, more accurate, and more practical. But behavioral economics, like its conventional bedfellow, is very much concerned with incentives, costs and benefits, cause and effect, and economic efficiency.
Behavioral economics enriches the conventional economics toolbox by incorporating insights from psychology, neuroscience, sociology, politics, and the law. We end up with more vibrant and revealing economic analyses based on more realistic assumptions about how individuals behave in the real world and the real-world circumstances that influence ...
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