Business, Legal & Accounting Glossary
Behavioural economics is essentially a combination of economics and psychology. It supplements mainstream economics with a realistic psychological foundation. Behavioural economics is said to augment the explanatory power of economic theory. It is believed to generate the following positive externalities for mainstream economic theory.
An important point to be noted is that behavioural economics does not summarily reject the neoclassical approach towards economics. (Neoclassical economic theory depends on concepts of utility maximization, efficiency and equilibrium).
Behavioural economics methods are markedly different from those prevalent in other areas of economic theory. In its initial days behavioral economics heavily relied on evidence gathered from experiments. Gradually behavioural economists have ventured beyond experimentation and adopted the entire range of methods applied by economists in general. In spite of its dependence on experimental data behavioural economics is an entirely different concept from the discipline of experimental economics. Behavioural economists are often denoted as ‘methodological eclectics’. Their prime point of difference with others lies on the psychological insights they bring to economic theory (and not onset of research methods applied by them). Experimental economists, on the other hand, differentiate themselves by their use and endorsement of experimentation as research tools.
Advancement in behavioural economics has brought it to such a level where it can effortlessly provide a parallel framework of economic analysis.
Some behavioural economic theory models sourced from recent research are mentioned below.
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This glossary post was last updated: 29th March, 2020 | 1 Views.