The Unfolding Landscape of Behavioral Economics: from the past to the future

Abstract

Consolidated by the award of the 2017 Economics Nobel Prize to behavioral economist Richard Thaler, behavioral economics is enjoying a golden age. It combines a diverse range of insights from across the social sciences – including economists’ powerful analytical tools, alongside rich evidence about real human behavior from other social sciences – especially psychology and sociology. This article explores the evolution of behavioral economics and some key behavioral insights about incentives and motivations; social influences and social learning, peer pressure, and group-think; heuristics and biases; decision-making under risk and uncertainty; present bias and procrastination; and nudging policy tools. These all illustrate how behavioral economics provides businesses and policy makers with a rich understanding of how real people think, choose, and decide.