BEYOND RATIONALITY: EXPLORING THE FASCINATING WORLD OF BEHAVIOURAL ECONOMICS

By Shreya Sharma

The rise of behavioural economics in recent years has been driven by a growing recognition that traditional economic models do not accurately capture the complexity of human decision-making. As we learn in our first-year economics courses at King's, these models are based on the assumption that people always make rational and selfinterested decisions, but in reality, people often make decisions that are influenced by a range of cognitive, social, and emotional factors.

Behavioural economics challenges these assumptions by acknowledging that humans are not always rational decision-makers and that our behaviour is often influenced by factors beyond our conscious awareness. For example, we may be more likely to choose an option simply because it is presented to us first, or because it is framed in a particular way. These factors can have a significant impact on our decisionmaking, and they are not accounted for in traditional economic models. In academia, the interdisciplinary nature of behavioural economics has led to a growing interest in the field. Many universities now offer courses and degree programs that focus on behavioural economics, allowing students to gain a deeper understanding of the complex factors that influence human decisionmaking.

Businesses are also recognizing the potential of behavioural economics to inform their strategies. Many companies are using insights from behavioural economics to design products, services, and marketing campaigns that are more appealing to consumers. For example, by understanding how people make purchasing decisions, businesses can design pricing strategies that are more effective, or use nudges to encourage customers to buy certain products. In policy circles, behavioural economics has also gained traction as a way to inform public policy. Policymakers are recognizing that traditional economic models do not always provide an accurate representation of human behaviour and that a more nuanced approach is needed to address complex societal issues. By incorporating insights from behavioural economics, policymakers can design more effective and targeted policies that take into account the real-world behaviour of individuals and communities.

In addition to the importance of behavioural economics, it can also be applied to daily life on an individual basis. From the perspective of students, principles of behavioural economics can be used to gain a deeper understanding of their own decision-making processes and to make more informed choices in their lives. For example, behavioural economics suggests that people tend to place more value on immediate rewards than on future ones, which can lead to procrastination. Students can use this knowledge to break tasks down into smaller, more manageable pieces, and to reward themselves along the way to stay motivated. Moreover, behavioural economics emphasizes the importance of making informed decisions based on all available information. Students can use this approach to make better decisions about their studies, such as choosing which courses to take or which study strategies to use.

Learning about behavioural economics was not only significant for me in terms of understanding the limitations of traditional economic models, but was also a turning point in my academic life. I had always been interested in economics, but the more I learned about behavioural economics, the more fascinated I became with the subject. It opened up a whole new way of thinking about human decision-making that resonated with me on a personal level.

As I delved deeper into the field, I found that it was not only relevant to economics, but also to psychology, sociology, and other social sciences. I spoke with experts in the field, attended seminars and workshops, and read extensively on the subject. It was clear to me that behavioural economics was a rapidly growing and exciting area of research with many practical applications.

As a result, I made the decision to add a major in Psychology to my degree program. This allowed me to gain a deeper understanding of the psychological processes that underpin decision-making, which I believed would be essential to my future work in behavioural economics. Now, as I prepare to graduate with a double major in Economics and Psychology, I feel that my decision to pursue behavioural economics was the right one. I am excited to continue my studies in this field at the graduate level and beyond, and I am confident that the skills and knowledge I have gained will serve me well in my future career.