A Practicum in Behavioral Economics I Section 1- The Irrational Quirks of Homo sapiens

PART I . SECTION THE IRRATIONAL QUIRKS OF HOMO SAPIENS In the Introduction , we alluded to the fact that behavioral economics as a separate field of inquiry serves three main purposes . First , it responds to the limitations of the neoclassical paradigm of Homo , an idealized version of a human being who behaves eminently rationally knowingly and selfishly , with unlimited computational capacity , never making systematic mistakes . Second , behavioral economics provides a clearer understanding of how Homo sapiens actually behave , given all of our irrational miscalculations , inconsistencies , contradictions , illusions , moods , biases , fallacies , and so BEHAVIORAL ECONOMICS

on ( if that isn enough ) Third , the field of behavioral economics proposes adjustments to the theories historically predicated on the choice behaviors scripted for Homo Referring to the diagram presented in the This Book Approach section , Section of the textbook pertains to the diagrams upper portion . Show where standard economic theory fails and adjust the theory . Behavioral Economics Here , we demonstrate how standard economic theory fails by highlighting the major disconnects between behavior predicted of Homo and that displayed by Homo sapiens ( you , me , and your fellow students ) We begin by our proclivities for committing the miscalculations , etc . mentioned above through thought and laboratory experiments that you will participate in , as well as through brief discussions of outcomes from interesting laboratory and field experiments published in academic journals . Section ( 2008 ) lumps all of these irrational quirks into what he calls predictable irrationality . The revisions are decisive enough as to be considered theories themselves ( and ( 1979 ) Prospect ' Which will unfold later in this section . 14 ARTHUR

includes more discussions of some of the studies mentioned here . Periodically , we will delve into the standard economic theory being tested by the laboratory experiments , and we will pinpoint how this theory has been revised in light of the outcomes of these experiments . This material is perhaps best described as the gist of behavioral economics . Unless otherwise indicated , the material in this section has either been taken directly from ( 201 ) or is based on discussions therein . Media Figure ( Section ) Arthur is licensed under a BY Attribution license BEHAVIORAL ECONOMICS PRACTICUM 15