Behavioral Economics For Dummies®

Chapter 8

How Norms, Peers, History, and Culture Influence Choice

In This Chapter

Looking at the decision-making bubble that conventional economics built

Recognizing the importance of social norms in making decisions

Feeling the pressure of peers

Seeing how history and culture affect the choices people make

Behavioral economics argues that decision making is often influenced by social context — social norms, peers, history, and culture. All these factors influence how choices are framed and which defaults are set in place. They also are what makes each person unique — and that uniqueness impacts on his preferences and the choices he makes.

It may seem obvious that social context affects choice, but conventional economics assumes that people are all the same and that social context isn’t important to the decisions they make. The sameness of all individuals flows from conventional economics’ focus on what is called the representative agent (an artificial individual — the average person — whose preferences and choices are assumed to be representative of all individuals).

In this chapter, ...