Behavioural Economics

Module code: EC3089

Module coordinator: Professor Sanjit Dhami

Behavioral economics is the fastest growing and most exciting field in economics. It enriches neoclassical economics with insights mainly from psychology, but also from biology, sociology, anthropology and neuroscience. Painstaking empirical work over the last four decades has given rise to a set of well-established empirical facts of human behavior, which cannot be satisfactorily accounted for by neoclassical economics. This includes largely negative evidence, and limited success, for unbounded rationality, use of classical statistics in decision making, expected utility theory, purely self-regarding preferences, exponential discounting, Nash equilibrium and its refinements. In contrast, the evidence is much better accounted for by models in behavioral economics.

The scope of behavioral economics is unlimited within the social sciences. Yet this course is not about bashing neoclassical economics but rather to show how we can constructively build on the base provided by it. We use insights from other disciplines but models in behavioral economics retain a distinctly economic flavor and are guided purely by the empirical evidence.  In due course my hope is that the prefix ‘behavioral’ washes away and this becomes the normal way that we do economics.

Welcome to the future of economics!

Topics covered

  • Behavioral decision theory and the evidence on human choice under risk and uncertainty
  • Models of social preferences and the evidence on human sociality
  • Models of time preferences and the evidence on temporal decisions
  • Models of strategic interaction and evidence on human choice in strategic settings
  • Models and evidence in bounded rationality

Learning

  • 20 one-hour lectures
  • 9 one-hour workshops

Assessment

  • Final Exam, (100%)