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While classical economics is based on the notion that people act with rational self-interest, many key money decisions--like splurging on an expensive watch--can seem far from rational. The field of behavioral economics sheds light on the many subtle and not-so-subtle factors that contribute to our financial and purchasing choices. And in Behavioral Economics For Dummies, readers will learn how social and psychological factors, such as instinctual behavior patterns, social pressure, and mental framing, can dramatically affect our day-to-day decision-making and financial choices.
Based on psychology and rooted in real-world examples, Behavioral Economics For Dummies offers the sort of insights designed to help investors avoid impulsive mistakes, companies understand the mechanisms behind individual choices, and governments and nonprofits make public decisions.
* A friendly introduction to the study of how and why people really make financial decisions
* The author is a professor of behavioral and institutional economics at Victoria University
An essential component to improving your financial decision-making (and even to understanding current events), Behavioral Economics For Dummies is important for just about anyone who has a bank account and is interested in why--and when--they spend money.
While classical economics is based on the notion that people act with rational self-interest, many key money decisions--like splurging on an expensive watch--can seem far from rational. The field of behavioral economics sheds light on the many subtle and not-so-subtle factors that contribute to our financial and purchasing choices. And in Behavioral Economics For Dummies, readers will learn how social and psychological factors, such as instinctual behavior patterns, social pressure, and mental framing, can dramatically affect our day-to-day decision-making and financial choices.
Based on psychology and rooted in real-world examples, Behavioral Economics For Dummies offers the sort of insights designed to help investors avoid impulsive mistakes, companies understand the mechanisms behind individual choices, and governments and nonprofits make public decisions.
* A friendly introduction to the study of how and why people really make financial decisions
* The author is a professor of behavioral and institutional economics at Victoria University
An essential component to improving your financial decision-making (and even to understanding current events), Behavioral Economics For Dummies is important for just about anyone who has a bank account and is interested in why--and when--they spend money.
Introduction 1
About This Book 1
Conventions Used in This Book 2
What You're Not to Read 2
Foolish Assumptions 3
How This Book isOrganized 3
Part I: Introducing Behavioral Economics: The Science of Making Real-World Choices 4
Part II: Understanding Choice 4
Part III: Growing the Economic Pie: The Economic Importance of Ethics, Well-Being, and Culture 4
Part IV: When Bubbles and Busts and Inefficiencies Are Possible: Some Behavioral Insights into the Strange World of Economic Reality 5
Part V: The Part of Tens 5
Icons Used in This Book 6
Where to Go from Here 6
Part I: Introducing Behavioral Economics: The Science of Making Real-World Choices 7
Chapter 1: Decoding Behavioral Economics 9
Making Wise Assumptions 9
Why reality matters 10
Why incentives matter - even in behavioral economics 10
Making Sense of Choice 11
Maximizing versus satisficing 11
The effect of emotions 12
The avoidance of loss 12
How options are framed 12
Paternalism versus free choice 13
The role of social context in decision making 14
Relative positioning 14
Growing the Economic Pie 15
Deciphering Bubbles and Busts 15
Inefficient markets and investment behavior 16
Emotions, intuition, animal spirits, and business cycles 16
Understanding Happiness: Money Isn't Everything 17
Chapter 2: Getting Real about Assumptions 19
Defining an Economic Model 20
Explaining economic phenomena 21
Making simplifying assumptions 21
Discovering the irrelevance of facts 22
Understanding the role of math in model building 23
Considering cause and effect 26
Watching out for spurious correlations 26
Contemplating Conventional Economic Assumptions and Real-World Alternatives 27
Conventional assumption #1: People's preferences are stable and consistent 27
Conventional assumption #2: People are solitary decision makers 28
Conventional assumption #3: How people form preferences doesn't matter 28
Conventional assumption #4: People have the same preferences 29
Conventional assumption #5: People are all maximizers 30
Conventional assumption #6: People have perfect knowledge 32
Conventional assumption #7: People have unbounded computational capabilities 33
Conventional assumption #8: People have willpower 34
Conventional assumption #9: People are capable of acting upon their preferences 35
Understanding Rational Economic Behavior 36
You can do no wrong: Errors and biases in decision making 37
Selfishness and the smart society 38
Getting to Know the Behavioral Economics Actor 39
Chapter 3: Neuroeconomics: Exploring the Brain for Economic Analysis 41
Where Neuroeconomics Fits in the Behavioral Economics
Perspective 43
The Brain and Economics 45
The evolution of the human brain 45
The division of labor in the human brain 48
The Emotional Brain 49
Descartes' error: The somatic marker hypothesis 49
Phineas Gage and the social and emotional side of rational decision making 50
How Emotions Affect Decision Making 53
Fear and decision making 53
Happiness and decision making 54
The Limits of the Human Brain and Homo Economicus 54
The brain isnot a calculating machine 55
The brain isa scarce resource 55
What Brain Sciences Confirm for the Behavioral Economist 57
People prefer the present to the future 57
People's aversion to loss affects their decision making 58
What people feel isn't always what they experience 58
People care about keeping up with - and beating -the Joneses 60
People's brains evolve over their lifetimes 61
People value fairness 62
People like to trust and be trusted 63
Chapter 4: Why Incentives and Markets Matter, but Money Isn't Everything 65
The Role of Economic Incentives for Economic Behavior 66
Why money isall that matters in conventional economics 67
Opportunity costs for Homo economicus 69
Decision Making and Opportunity Costs 71
Using up your mind: Bounded rationality 71
Considering costs other than money: Psychological costs 72
Reducing opportunity costs in the real world: Satisficing behavior 73
Weighing the opportunity cost of altruism 75
Supply and Demand and Behavioral Economics 75
Introducing the bandwagon effect 76
Investigating the snob effect 77
Interjecting morals and ethics 78
Introducing sociology to supply and demand 79
Economic Psychology: How Thoughts and Feelings Impact Decisions 84
Loss aversion: How framing, ownership, and control affect economic behavior 85
How the fear of uncertainty influences decisions 85
The warm glow: Why people sacrifice money for fairness or justice 87
Forfeiting money for status 88
Part II: Understanding Choice 89
Chapter 5: Exploring the Limits to Free Choice 91
Free Choice in Economic Decision Making 92
What conventional economics says 92
What behavioral economics says 93
Revealed Preferences: When Choices Reveal Your Inner Self 94
The narrative about preferences 95
False preferences versus true preferences 96
The limits of revealed preferences and free choice 98
The Illusion of Free Choice 99
Advertising and preference distortions 99
Self-control and free choice 101
Defaults as a determinant of choice 102
Herding, the bandwagon effect, and free choice: Are followers irrational? 103
Constraining Choice versus Freedom of Choice 104
Information 104
Education 105
Consumer rights 105
Chapter 6: Quick and Simple Heuristics and Real-World Decision Making 107
A Bird's-Eye View of Smart Decision Making in Conventional Economics 108
Decision-making norms in conventional economics: The human calculating machine 109
The optimizing decision-making machine in conventional economics 110
Core conventional benchmarks for rational choice: To dream an impossible dream 111
The limits of conventional rationality 112
Rethinking Bounded Rationality and the Limits of the Mind 113
Bounded rationality and satisficing: Rationality within reason 114
The two blades of the decision-making scissors: Ecological rationality 114
Prospect Theory: Describing Average Decision-Making Behavior 116
Introducing prospect theory: Real-world decision making under uncertainty 117
Thinking about prospect theory and conventional norms 118
Exploring emotions as a hot bed of irrationality 118
The fundamentals of prospect theory: Understanding the value function 119
Unveiling Some Implications of Loss Aversion 122
Loss aversion and the certainty effect 122
Risk seeking in losses 123
The endowment effect: Explaining attachment to possessions 124
Uncovering Errors and Biases in Decision Making 125
Overconfidence 125
Herd behavior 125
Confirmation bias 126
Anchoring 126
Generalizing 127
Less isBest in Decision-Making: Fast and Frugal Heuristics 127
Exploring the superiority of heuristics 128
Understanding human rationality: New benchmarks built on human capabilities 130
Chapter 7: How the Framing of Choices Affects Decision Making 131
The Framing Effect 131
Framing and the economic schools of thought 132
The effect of framing on preferences and choices 133
Appreciating the objective unimportance of frames: The errors and biases approach 133
Understanding frames as heuristics 134
Framing in Pictures: The Possibility of Cognitive Illusions 134
Framing the Mona Lisa 135
Distorting the line illusion 135
Framing faces 136
Framing automobiles: Surface beauty versus substance 137
The letter illusion 138
We're All Framed: Framing and Decision Making 139
Framing and loss aversion: The classic Asian disease experiment 140
When money isn't everything 142
Saving a penny to lose a bundle: Framing prices through relative positioning 143
Frames as Defaults: How Anchors Sway the Course of Decision Making 144
Changing default options and choices 144
Revisiting choice architecture 146
Framing isimportant, but so are income and prices 147
The Inescapable Frame and Rational Decision Making 148
Understanding frames as an information-generating machine 148
Repairing frames and rational decision making 148
Introducing product labels into the framing arsenal 149
Market Failure and the Framing Effect 149
Chapter 8: How Norms, Peers, History, and Culture Influence Choice 153
Making Decisions in a Bubble, the Conventional Economics Way 154
Making decisions as if other people don't matter 155
Making decisions as if history doesn't matter 155
Making decisions as if society doesn't matter 157
Introducing Social Norms to Decision Making 157
Looking at some norms 158
Identifying how trust impacts economic development 161
Seeing how discriminating norms can lead to a slow economy 162
Studying the role of education in the formation of norms and the shaping of preferences 163
The carrot and the stick: Exploring the enforcement of social norms 163
Peer Pressure: Seeing How Peers Affect Decision Making 164
How History and Culture Affect Choice 165
Rooting choice in history 165
Culture club:...
| Erscheinungsjahr: | 2012 |
|---|---|
| Fachbereich: | Volkswirtschaft |
| Genre: | Importe, Wirtschaft |
| Rubrik: | Recht & Wirtschaft |
| Medium: | Taschenbuch |
| Inhalt: | 360 S. |
| ISBN-13: | 9781118085035 |
| ISBN-10: | 1118085035 |
| Sprache: | Englisch |
| Einband: | Kartoniert / Broschiert |
| Autor: | Altman, Morris |
| Hersteller: |
John Wiley & Sons
John Wiley & Sons Inc |
| Verantwortliche Person für die EU: | Wiley-VCH GmbH, Boschstr. 12, D-69469 Weinheim, amartine@wiley-vch.de |
| Maße: | 243 x 192 x 23 mm |
| Von/Mit: | Morris Altman |
| Erscheinungsdatum: | 27.03.2012 |
| Gewicht: | 0,577 kg |
Introduction 1
About This Book 1
Conventions Used in This Book 2
What You're Not to Read 2
Foolish Assumptions 3
How This Book isOrganized 3
Part I: Introducing Behavioral Economics: The Science of Making Real-World Choices 4
Part II: Understanding Choice 4
Part III: Growing the Economic Pie: The Economic Importance of Ethics, Well-Being, and Culture 4
Part IV: When Bubbles and Busts and Inefficiencies Are Possible: Some Behavioral Insights into the Strange World of Economic Reality 5
Part V: The Part of Tens 5
Icons Used in This Book 6
Where to Go from Here 6
Part I: Introducing Behavioral Economics: The Science of Making Real-World Choices 7
Chapter 1: Decoding Behavioral Economics 9
Making Wise Assumptions 9
Why reality matters 10
Why incentives matter - even in behavioral economics 10
Making Sense of Choice 11
Maximizing versus satisficing 11
The effect of emotions 12
The avoidance of loss 12
How options are framed 12
Paternalism versus free choice 13
The role of social context in decision making 14
Relative positioning 14
Growing the Economic Pie 15
Deciphering Bubbles and Busts 15
Inefficient markets and investment behavior 16
Emotions, intuition, animal spirits, and business cycles 16
Understanding Happiness: Money Isn't Everything 17
Chapter 2: Getting Real about Assumptions 19
Defining an Economic Model 20
Explaining economic phenomena 21
Making simplifying assumptions 21
Discovering the irrelevance of facts 22
Understanding the role of math in model building 23
Considering cause and effect 26
Watching out for spurious correlations 26
Contemplating Conventional Economic Assumptions and Real-World Alternatives 27
Conventional assumption #1: People's preferences are stable and consistent 27
Conventional assumption #2: People are solitary decision makers 28
Conventional assumption #3: How people form preferences doesn't matter 28
Conventional assumption #4: People have the same preferences 29
Conventional assumption #5: People are all maximizers 30
Conventional assumption #6: People have perfect knowledge 32
Conventional assumption #7: People have unbounded computational capabilities 33
Conventional assumption #8: People have willpower 34
Conventional assumption #9: People are capable of acting upon their preferences 35
Understanding Rational Economic Behavior 36
You can do no wrong: Errors and biases in decision making 37
Selfishness and the smart society 38
Getting to Know the Behavioral Economics Actor 39
Chapter 3: Neuroeconomics: Exploring the Brain for Economic Analysis 41
Where Neuroeconomics Fits in the Behavioral Economics
Perspective 43
The Brain and Economics 45
The evolution of the human brain 45
The division of labor in the human brain 48
The Emotional Brain 49
Descartes' error: The somatic marker hypothesis 49
Phineas Gage and the social and emotional side of rational decision making 50
How Emotions Affect Decision Making 53
Fear and decision making 53
Happiness and decision making 54
The Limits of the Human Brain and Homo Economicus 54
The brain isnot a calculating machine 55
The brain isa scarce resource 55
What Brain Sciences Confirm for the Behavioral Economist 57
People prefer the present to the future 57
People's aversion to loss affects their decision making 58
What people feel isn't always what they experience 58
People care about keeping up with - and beating -the Joneses 60
People's brains evolve over their lifetimes 61
People value fairness 62
People like to trust and be trusted 63
Chapter 4: Why Incentives and Markets Matter, but Money Isn't Everything 65
The Role of Economic Incentives for Economic Behavior 66
Why money isall that matters in conventional economics 67
Opportunity costs for Homo economicus 69
Decision Making and Opportunity Costs 71
Using up your mind: Bounded rationality 71
Considering costs other than money: Psychological costs 72
Reducing opportunity costs in the real world: Satisficing behavior 73
Weighing the opportunity cost of altruism 75
Supply and Demand and Behavioral Economics 75
Introducing the bandwagon effect 76
Investigating the snob effect 77
Interjecting morals and ethics 78
Introducing sociology to supply and demand 79
Economic Psychology: How Thoughts and Feelings Impact Decisions 84
Loss aversion: How framing, ownership, and control affect economic behavior 85
How the fear of uncertainty influences decisions 85
The warm glow: Why people sacrifice money for fairness or justice 87
Forfeiting money for status 88
Part II: Understanding Choice 89
Chapter 5: Exploring the Limits to Free Choice 91
Free Choice in Economic Decision Making 92
What conventional economics says 92
What behavioral economics says 93
Revealed Preferences: When Choices Reveal Your Inner Self 94
The narrative about preferences 95
False preferences versus true preferences 96
The limits of revealed preferences and free choice 98
The Illusion of Free Choice 99
Advertising and preference distortions 99
Self-control and free choice 101
Defaults as a determinant of choice 102
Herding, the bandwagon effect, and free choice: Are followers irrational? 103
Constraining Choice versus Freedom of Choice 104
Information 104
Education 105
Consumer rights 105
Chapter 6: Quick and Simple Heuristics and Real-World Decision Making 107
A Bird's-Eye View of Smart Decision Making in Conventional Economics 108
Decision-making norms in conventional economics: The human calculating machine 109
The optimizing decision-making machine in conventional economics 110
Core conventional benchmarks for rational choice: To dream an impossible dream 111
The limits of conventional rationality 112
Rethinking Bounded Rationality and the Limits of the Mind 113
Bounded rationality and satisficing: Rationality within reason 114
The two blades of the decision-making scissors: Ecological rationality 114
Prospect Theory: Describing Average Decision-Making Behavior 116
Introducing prospect theory: Real-world decision making under uncertainty 117
Thinking about prospect theory and conventional norms 118
Exploring emotions as a hot bed of irrationality 118
The fundamentals of prospect theory: Understanding the value function 119
Unveiling Some Implications of Loss Aversion 122
Loss aversion and the certainty effect 122
Risk seeking in losses 123
The endowment effect: Explaining attachment to possessions 124
Uncovering Errors and Biases in Decision Making 125
Overconfidence 125
Herd behavior 125
Confirmation bias 126
Anchoring 126
Generalizing 127
Less isBest in Decision-Making: Fast and Frugal Heuristics 127
Exploring the superiority of heuristics 128
Understanding human rationality: New benchmarks built on human capabilities 130
Chapter 7: How the Framing of Choices Affects Decision Making 131
The Framing Effect 131
Framing and the economic schools of thought 132
The effect of framing on preferences and choices 133
Appreciating the objective unimportance of frames: The errors and biases approach 133
Understanding frames as heuristics 134
Framing in Pictures: The Possibility of Cognitive Illusions 134
Framing the Mona Lisa 135
Distorting the line illusion 135
Framing faces 136
Framing automobiles: Surface beauty versus substance 137
The letter illusion 138
We're All Framed: Framing and Decision Making 139
Framing and loss aversion: The classic Asian disease experiment 140
When money isn't everything 142
Saving a penny to lose a bundle: Framing prices through relative positioning 143
Frames as Defaults: How Anchors Sway the Course of Decision Making 144
Changing default options and choices 144
Revisiting choice architecture 146
Framing isimportant, but so are income and prices 147
The Inescapable Frame and Rational Decision Making 148
Understanding frames as an information-generating machine 148
Repairing frames and rational decision making 148
Introducing product labels into the framing arsenal 149
Market Failure and the Framing Effect 149
Chapter 8: How Norms, Peers, History, and Culture Influence Choice 153
Making Decisions in a Bubble, the Conventional Economics Way 154
Making decisions as if other people don't matter 155
Making decisions as if history doesn't matter 155
Making decisions as if society doesn't matter 157
Introducing Social Norms to Decision Making 157
Looking at some norms 158
Identifying how trust impacts economic development 161
Seeing how discriminating norms can lead to a slow economy 162
Studying the role of education in the formation of norms and the shaping of preferences 163
The carrot and the stick: Exploring the enforcement of social norms 163
Peer Pressure: Seeing How Peers Affect Decision Making 164
How History and Culture Affect Choice 165
Rooting choice in history 165
Culture club:...
| Erscheinungsjahr: | 2012 |
|---|---|
| Fachbereich: | Volkswirtschaft |
| Genre: | Importe, Wirtschaft |
| Rubrik: | Recht & Wirtschaft |
| Medium: | Taschenbuch |
| Inhalt: | 360 S. |
| ISBN-13: | 9781118085035 |
| ISBN-10: | 1118085035 |
| Sprache: | Englisch |
| Einband: | Kartoniert / Broschiert |
| Autor: | Altman, Morris |
| Hersteller: |
John Wiley & Sons
John Wiley & Sons Inc |
| Verantwortliche Person für die EU: | Wiley-VCH GmbH, Boschstr. 12, D-69469 Weinheim, amartine@wiley-vch.de |
| Maße: | 243 x 192 x 23 mm |
| Von/Mit: | Morris Altman |
| Erscheinungsdatum: | 27.03.2012 |
| Gewicht: | 0,577 kg |
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