Behavioral economy

Behavioral economists believe that adding psychological influences to an economic analysis improves its realism. In The Theory of Moral Sentiments (1759), Adam Smith already proposed to investigate individual economic behavior by performing psychological experiments. The rational human being (“homo economicus”) would nevertheless remain a staple of economics for a long time to come. It was not until the sixties of the previous century that all this was set to change, when psychologists such as Daniel Kahneman and Amos Tversky started comparing their cognitive models for decision-making behavior with economic models for rational behavior.

Huge growth

Over the past few decades, behavioral economy has experienced a huge growth. Governments and businesses have also become much more interested in fields of application, such as the promotion of sustainable, healthy and responsible financial behavior. An important lesson learned is that there many more ways to influence behavior than merely by rules and regulations, taxation, funding and awareness campaigns. It matters how choices are presented, as such presentation is never neutral. You might think of organ donation policies. If an opt-in system of donation (“given consent”) is the rule, this leads to fewer registered donors than if an opt-out system of donation (“presumed consent”) is the rule, which requires people to actively make an effort to register their non-compliance.

TiSEM

In the Tilburg School of Economics and Management (TiSEM), many scholars are working on topics in behavioral economics. Peter Kooreman, for instance, looks into the decision-making behavior of consumers and households. Jan Potters conducts experiments involving altruism in the domain of decision-making behavior. Ben Vollaard examines crime preventive behavior in potential victims of theft. Rik Pieters (picture, right hand) studies the effects of commercials and the role played by attention and emotions in consumer decisions. Henriëtte Prast (picture, left hand), finally, tests lessons learned from behavioral economics for improving government policies in areas such as financial planning, health and sustainability.