An introduction to behavioral economics

Abstract

It seems natural to start the book by asking, what is behavioral economics? That’s a tough question, but I will give you three answers. You might think that this is two too many, but, if we put all three together, we get a de¿ nition of behavioral economics that I am happy with. So, here’s the ¿ rst answer: Behavioral economics is about understanding economic behavior and its consequences. It’s about understanding why someone buys a hotdog, goes to work, saves for retirement, gives to charity, gets a quali¿ cation, sells an old car, gambles on a horse race, cannot quit smoking, etc. It’s also about understanding whether people make good or bad choices, and could be helped to make better choices.

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