Human behavior research has traditionally belonged to the category of psychology and seems to have little to do with economics.
However, as we learn more about how the brain works through the dual disciplines of neuroscience and psychology, there is more and more integration with the field of economics to better understand how people make economic decisions.
In recent years, this has changed a lot, and it is an emerging field worthy of introduction and explanation.
Traditional views of economics and financial decision making
Sometimes in economics, this field is forgotten in this field. Human behavior When making financial decisions.
The traditional economist's point of view is that the world is full of emotional, logical decision makers who are always thinking rationally about their conclusions. The basis of this view is that human behavior exhibits three key characteristics: infinite rationality, unlimited willpower, and infinite selfishness.
This is always the case in the face of the findings of cognitive and social psychologists who questioned these assumptions as early as the 1950s.
With the rise of behavioral neuroscience since the 1980s [especially Kahneman's work] providing more insight into the functioning of the brain, we are now more than ever aware of the role of emotions and prejudice in all decisions: from simple Daily decisions, such as what kind of clothing to wear, and bigger decisions that may affect many people.
Overconfidence and optimism are two examples of behavioral traits that can lead to suboptimal financial decisions and turn to traditional models of use. People have also been shown to make bad decisions, Even if they know that this is not the bestDue to lack of self-control.
Therefore, this is where many of the beliefs that behavioral economics can intervene and modify traditional economic views.
What is behavioral economics - how does it help?
Behavioral economics and behavioral finance study the effects of psychological, social, cognitive, and emotional factors on economic decision-making.
This may apply to individuals or institutions and involves the consequences of market prices, dividends and resource allocation.
Among the three human behavioral features included in the traditional model outlined above, infinite rationality has received special attention and a new understanding has emerged in the field of neuroscience.
A better understanding of how people make financial decisions can help in many ways: from personal finance to organizational shaping, and trying to get more customer registrations; from stock market trading to government vagaries, and how they make financial legislation. .
Perhaps behavioral economics can help people make better decisions in the future to protect their financial future; if they pay more attention to it before the 2008 global financial crisis, it may even help.
Orignal From: Quick introduction to behavioral economics
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