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Behavioral economics

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Behavioral economics

Behavioral economics is a field of economics that studies the behavior of human beings in economic situations. One of the main objectives of behavioral economics is particularly describe and explain why, in some situations, humans adopt a behavior that may seem paradoxical or non-rational, that is to say, contrary to what would predict the theory of Homo economicus. This line of research is therefore based heavily on laboratory experimentation (experimental economics) or collecting actual data and is therefore at the interface with psychology.

Experimental economics is a discipline that has flourished since the late twentieth century, Daniel Kahneman has also received, in 2002, the “Nobel Prize” of economics for his pioneering work in this area. Another area in the field of economics, behavioral finance is the more specific study of behavior in financial market conditions and therefore insists more on their collective dimension.

The conceptual bases

Some, because of the semantic neighborhood between behavioral economics, the name given by American researchers and behaviorism, consider that this area is primarily from behavioral or behaviorist psychology. However, unlike the latter, behavioral economics is not limited to a simple study of symptoms (economic effects in this case) and couple stimulus-reaction, even if the under-reaction/overreaction phenomena, studied in particular by Richard Thaler, are part of this economic analysis discipline. It also appealed to many other concepts, both of individual psychology as social psychology, especially anything that relates to cognitive and emotional biases, whether individual or result from the group effects (conformism … ).

Observed methods and phenomena

Behavioral economics studies these phenomena, both large-scale (macro) by surveys of segments of the population concerned, field studies and analysis of statistical series, and by less generalizable methods (micro) close to the experimental economics, which is to simulate in the laboratory some individual economic behavior through games.

Note also that much of the research in behavioral economics and phenomena observed are common with those of behavioral finance, so that the two disciplines are often grouped together.

The difference macro-micro already mentioned (and presents in both economics and finance) lies in the scale of phenomena, the time scale of the reality of situations (and motivation). Thus

  • Advances in neuroeconomics contribute to this research. The findings relate in particular to the fact that the economic decision making is impacted by psychological factors, both cognitive and emotional, that differ in part to rationality attributed to the homo economicus.

  • That said, and the issue being common to all branches of experimental economics, it is difficult to extrapolate the behavior of individuals or small groups to the overall economy. Especially because, in a crowd or mass, the individual tends to change its behavior (e.g.. exacerbated mimicry when bubbles and crashes). Thus the study of the behavior of the people, or at least segments of the population (types of economic agents) is also used. This is the sociology techniques, both in the form of surveys and statistical inferences. These studies can easily lead to large-scale field experiments, which would raise the ethical problem of collective manipulation.

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