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Bus/Financial - Economics
Additional field(s): Business/Commerce (general) | | English term or phrase: Behavioural economics | Definition from The Economist :
A branch of ECONOMICS that concentrates on explaining the economic decisions people make in practice, especially when these conflict with what conventional economic theory predicts they will do. Behaviourists try to augment or replace traditional ideas of economic rationality (homo economicus) with decision-making models borrowed from psychology. According to psychologists, people are disproportionately influenced by a fear of feeling regret and will often forgo benefits even to avoid only a small risk of feeling they have failed. They are also prone to cognitive dissonance, often holding on to a belief plainly at odds with new evidence, usually because the belief has been held and cherished for a long time. Then there is anchoring: people are often overly influenced by outside suggestion. People apparently also suffer from status quo bias: they are willing to take bigger gambles to maintain the status quo than they would be to acquire it in the first place.
Traditional UTILITY theory assumes that people make individual decisions in the context of the big picture. But psychologists have found that they generally compartmentalise, often on superficial grounds. They then make choices about things in one particular mental compartment without taking account of the implications for things in other compartments.
There is lots of evidence that people are persistently and irrationally overconfident. They are also vulnerable to hindsight bias: once something happens they overestimate the extent to which they could have predicted it. Many of these traits are captured in PROSPECT THEORY, which is at the heart of much of behavioural economics.
Example sentence(s): - Behavioral economics blossomed from the realization that neither point of view was correct. Library Economics Liberty
- Behavioral economics explains why we procrastinate, buy, borrow, and grab chocolate on Harvard Magazine
- Economics orthodoxy may look down on behavioral economics, but it's the most important development in economics in a long time. The Christian Science Monitor.
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| الاقتصاد السلوكي | Definition:
الاقتصاد السلوكي هو دراسة أثر علم النفس في عملية صنع القرار الاقتصادي وبعبارة أخرى ، كيف يمكن أن تؤثر عواطف وأفكار الناس على كيفية اتخاذ القرارات المالية.
Behavioral economics and its related area of study, behavioral finance, use social, cognitive and emotional factors in understanding the economic decisions of individuals and institutions performing economic functions, including consumers, borrowers and investors, and their effects on market prices, returns and the resource allocation. The fields are primarily concerned with the bounds of rationality (selfishness, self-control) of economic agents. Behavioral models typically integrate insights from psychology with neo-classical economic theory. |
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 Marwa Shehata
Egypt
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