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  3. American Economic Review
  4. May 2015
  5. Principles of (Behavioral) Economics

Principles of (Behavioral) Economics

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Abstract

Behavioral economics has become an important and integrated component of modern economics. Behavioral economists embrace the core principles of economics—optimization and equilibrium—and seek to develop and extend those ideas to make them more empirically accurate. Behavioral models assume that economic actors try to pick the best feasible option and those actors sometimes make mistakes. Behavioral ideas should be incorporated throughout the first-year undergraduate course. Instructors should also considering allocating a lecture (or more) to a focused discussion of behavioral concepts. We describe our approach to such a lecture, highlighting six modular principles and empirical examples that support them.

Citation

Laibson, David, and John A. List. 2015. "Principles of (Behavioral) Economics." American Economic Review, 105 (5): 385-90. DOI: 10.1257/aer.p20151047

JEL Classification

  • A22 Economic Education and Teaching of Economics: Undergraduate
  • D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making