This document provides you with an introduction to Behavioural Economics. In addition to that, you will find some key concepts of this discipline such as: Fast and slow systems & WYSIATI and some book recommendations.
Behavioural Economics tries to predict individual and collective
behaviour.
Behavioural Economics is a mix of Psychology and Economics.
Behaviour has micro and macro consequences. It is very difficult to
change it and it is at the heart of personal and business decisions.
Behavioural sciences combine: Behavioural Science, Biology, Computer
Science, Consumer Behaviour, Economics, Marketing, Mathematics,
Neuroscience, Philosophy, Psychology, Sociology and Statistics. In class,
we also added: Geography, Chemistry and Anthropology (the study of
people and their cultures).
The time value of money = Money available at the present time is worth
more than the identical sum in the future due to its earning capacity. E.g.
A pound today is worth more than a pound tomorrow.
Key ideas in Behavioural Economics:
• Rationality — Econs (fast) VS humans (slow)
• WYSIATI (what you see is all there is) and biases in information use
• Intuition and expertise
WYSIATI is the acronym for “what you see is all there is”, a cognitive bias
described by Daniel Kahneman in his book “Thinking, fast and slow”.
WYSIATI refers to the fact that we normally make our judgements and
impressions according to the information we have available. In general,
we do not spend too much time thinking: “Well, there are still many
things I do not know”. Simply, we assert what we do know. (Sáez,
Francisco — FacileThings)
Example: Egocentric attribution bias — In groups, individual members
tend to overstate their personal contribution to collective projects. How
does WYSIATI explain this? —> You have direct experience of what you
did but not what others did. And, as far as you are concerned, what you
see is all there is.
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