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Behavioral Economics For Dummies

A guide to the study of how and why you really make financial decisionsWhile 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… (More)

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Sections

Introduction
About This Book
Conventions Used in This Book
What You’re Not to Read
Foolish Assumptions
How This Book Is Organized
Part II: Understanding Choice
Part V: The Part of Tens
Icons Used in This Book
Where to Go from Here
Chapter 1
Making Wise Assumptions
Why reality matters
Why incentives matter — even in behavioral economics
Making Sense of Choice
Maximizing versus satisficing
The effect of emotions
The avoidance of loss
How options are framed
Paternalism versus free choice
The role of social context in decision making
Relative positioning
Growing the Economic Pie
Deciphering Bubbles and Busts
Inefficient markets and investment behavior
Emotions, intuition, animal spirits, and business cycles
Understanding Happiness: Money Isn’t Everything
Defining an Economic Model
Explaining economic phenomena
Making simplifying assumptions
Discovering the irrelevance of facts
Understanding the role of math in model building
Considering cause and effect
Watching out for spurious correlations
Conventional assumption #5: People are all maximizers
Conventional assumption #6: People have perfect knowledge
Conventional assumption #8: People have willpower
Understanding Rational Economic Behavior
You can do no wrong: Errors and biases in decision making
Selfishness and the smart society
Getting to Know the Behavioral Economics Actor
Neuroeconomics: Exploring the Brain for Economic Analysis
The Brain and Economics
The evolution of the human brain
The division of labor in the human brain
The Emotional Brain
Descartes’ error: The somatic marker hypothesis
How Emotions Affect Decision Making
Fear and decision making
Happiness and decision making
The Limits of the Human Brain and Homo Economicus
The brain is not a calculating machine
The brain is a scarce resource
What Brain Sciences Confirm for the Behavioral Economist
People prefer the present to the future
People’s aversion to loss affects their decision making
What people feel isn’t always what they experience
People’s brains evolve over their lifetimes
People value fairness
People like to trust and be trusted
Why Incentives and Markets Matter, but Money Isn’t Everything
The Role of Economic Incentives for Economic Behavior
Why money is all that matters in conventional economics
Opportunity costs for Homo economicus
Decision Making and Opportunity Costs
Using up your mind: Bounded rationality
Considering costs other than money: Psychological costs
Weighing the opportunity cost of altruism
Supply and Demand and Behavioral Economics
Introducing the bandwagon effect
Investigating the snob effect
Interjecting morals and ethics
Introducing sociology to supply and demand
How the fear of uncertainty influences decisions
Forfeiting money for status
Free Choice in Economic Decision Making
What conventional economics says
What behavioral economics says
Revealed Preferences: When Choices Reveal Your Inner Self
The narrative about preferences
False preferences versus true preferences
The limits of revealed preferences and free choice
The Illusion of Free Choice
Advertising and preference distortions
Self-control and free choice
Defaults as a determinant of choice
Constraining Choice versus Freedom of Choice
Information
Education
Consumer rights
Quick and Simple Heuristics and Real-World Decision Making
The limits of conventional rationality
Rethinking Bounded Rationality and the Limits of the Mind
Bounded rationality and satisficing: Rationality within reason
Prospect Theory: Describing Average Decision-Making Behavior
Thinking about prospect theory and conventional norms
Exploring emotions as a hot bed of irrationality
Unveiling Some Implications of Loss Aversion
Loss aversion and the certainty effect
Risk seeking in losses
The endowment effect: Explaining attachment to possessions
Uncovering Errors and Biases in Decision Making
Overconfidence
Herd behavior
Confirmation bias
Anchoring
Generalizing
Less Is Best in Decision-Making: Fast and Frugal Heuristics
Exploring the superiority of heuristics
The Framing Effect
Framing and the economic schools of thought
The effect of framing on preferences and choices
Understanding frames as heuristics
Framing in Pictures: The Possibility of Cognitive Illusions
Framing the Mona Lisa
Distorting the line illusion
Framing faces
Framing automobiles: Surface beauty versus substance
The letter illusion
We’re All Framed: Framing and Decision Making
When money isn’t everything
Changing default options and choices
Revisiting choice architecture
Framing is important, but so are income and prices
The Inescapable Frame and Rational Decision Making
Understanding frames as an information-generating machine
Repairing frames and rational decision making
Introducing product labels into the framing arsenal
Market Failure and the Framing Effect
Making Decisions in a Bubble, the Conventional Economics Way
Making decisions as if other people don’t matter
Making decisions as if history doesn’t matter
Making decisions as if society doesn’t matter
Introducing Social Norms to Decision Making
Looking at some norms
Identifying how trust impacts economic development
Peer Pressure: Seeing How Peers Affect Decision Making
How History and Culture Affect Choice
Rooting choice in history
Why Gender, Children, and Age Matter for Economic Analysis
How Gender Affects Choice
Not tonight, honey: Conventional choice theory
Household bargaining power and women’s rights
Identifying why women are more risk averse than men
Exploring women’s altruistic preferences
Examining labor market discrimination
The Role of Children in Economic Decision Making
News Flash! Preferences Change with Age
Why Most People Pay Taxes: The Big Stick versus the Warm Glows
How the big stick induces tax payments
The niceness effect
Social norms and taxes
A sense of fairness and tax compliance
Different Perspectives on Reducing Pollution
Exploring the economics of pollution control
Thinking about the green corporation
Studying social norms and the greening of the world
Crime and Punishment
The calculating criminal
Addiction and criminal behavior
Why most people don’t commit crimes even when crime pays
An Introduction to Labor Supply
Decoding the reality of labor supply
Mapping out changes to labor supply
Uncovering what people do when they aren’t working
The income-leisure trade-off: Bribing people to work
How target income affects labor supply
Why increasing income doesn’t reduce labor supply
Labor supply when market employment is a superior good
Social welfare programs and labor supply
Norms, anchors, default retirement age, and labor supply
Determining industrial relations through market forces
Understanding why the behavioral firm wins out
Types of x-inefficiency
When product markets aren’t competitive enough
Preferences, managerial slack, and x-inefficiency
Efficiency wages: Connecting wages, effort, and productivity
Exploring fairness and gift exchange inside the firm
Ethical Behavior: An Introduction
The Conventional Perspective on Ethical Behavior and the Economy
The Good Company
The Compatibility between Ethics and Profits
Examining x-efficiency and the socially responsible firm
How ethical consumers sustain and grow ethical production
What Behavioral Economics Has to Say about Institutions
The decision-making context
The theory of the firm
The New Institutional Economics
Institutions and Wealth Creation
Governance
Culture
What Behavioral Finance Is
The Efficient Asset Market Models and Their Limits
The efficient market hypothesis
The random walk hypothesis
Irrational Exuberance: Smells Like Animal Spirit
Bubbles and Busts: A Preface to Inefficient Markets
The Dutch tulip bulb bubble
Contemporary bubbles: Evidence of inefficient markets
The causes of financial bubbles
Introducing Psychology in Business Cycle Narratives
Understanding animal spirits
Economic Psychology and Government Policy
Happiness and Conventional Economics
How happiness is measured
The art of being happy
Diminishing returns for income and wealth
What increasing per-capita income ignores
Happiness and Behavioral Economics
What makes us happy: The individual versus the expert
The new empirics of the happiness debate
What money can’t buy (at least not easily)
How Government Policy Affects Happiness
The Part of Tens
Consumer Rights and Protection and the Framing of Information
Product Labeling and Consumer Choice
Financial Markets and Information Deceit
Saving for the Future
Organ Donations
Weakness of Will and Self-Control
Labor Market Regulation and Economic Efficiency
Crime, Punishment, and Identity
Population Growth and the Empowerment of Women
Tax Compliance: The Carrot Is as Important as the Stick
Trust and Economic Efficiency in an Imperfect World
The Ultimatum Game: Fairness and Punishment
The Dictator Game: Being Fair Because It’s the Right Thing to Do
Fair Wage Experiments: Adventures into Labor Market Dynamics
Public Goods Games: Sacrificing for the Public Good
The Dark Side of Humanity: It Isn’t All about Lovingkindness
The Endowment Effect: How Ownership Affects Behavior
Market Games: Markets Work Even When They’re “Irrational”
Experiments on Bounded Rationality
Be Wary of Overconfidence
You Can’t Believe Everything You Read
Don’t Blindly Follow the Herd
You Can’t Trust Everyone
Invest Simply
Pay Attention to Sample Size
Read the Fine Print
Being Nice Pays
Educate Yourself
Index

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Category:	Uncategorized.
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Upload Date:	01/23/2012
ISBN	9781118089705
Copyright:	Traditional Copyright: All rights reserved
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