Behavioural Economics: The Economy Key Ideas

The book begins by tracing the evolution of the field from its origins in Adam Smith's moral sentiments through the work of Herbert Simon to Daniel Kahneman and Richard Thaler today. The book explores how behavioral economics has advanced our understanding of human preferences including notions of fairness, reciprocity, and inequality aversion, and the mental processes involved in decision making, which vary with the complexity of the decision and the ability of the decision-maker to process the information. The decision-making of individuals within social and economic groups is explored, including financial practitioners and what this can mean for financial markets. Finally the book looks at the ways in which findings from behavioral economics have been used to alter the decisions people make, such as the nudge approach, and the ethics of such persuasion.