A. Behavioral Economics as defined by Dr. Anger and Dr. Loewenstein is an “attempt to increase the explanatory and predictive power of economic theory by providing it with more psychologically plausible foundations.” B. Thesis Statement – Behavioral Economics is a viable method that should be used to help economists stabilize our economy towards prosperity. C. Why is it important – Economics effects everyone on our planet. If economists can build a better understanding of the economic phenomena, they have an increased probability of reducing or eliminating future rescissions or depressions. I) Section #1 -- What is BDR/BDM and Why Does It Matter to Economics A. Topic Sentence – BDR is defined as “study of judgment and decision making by taking …show more content…
Two critical questions Baruch Fischoff (1988) believes psychologists must answer in terms of BDR is “(a) Do people perform the way that the models claim they should? (b) If not, how can people be helped to improve their performance?” C. Economic decision making models of the past have based their theories that people optimize their economic decision making. Behavior Economics wants to understand what things people are trying to improve (Fischhoff 1988). D. This research will help investors understand their own thought processes and help them make the most rational decision available to them even under pressure. This could help companies and individual investors alike be able to increase their return on investments (RIO). II) Section #2 – Beginnings of Bringing BDR and Economics Together A. Topic Sentence – Tversky and Kahneman’s made profound steps that increased and developed a greater interest in combining both the disciplines of economics and psychology through the studies of BDR. They were successful in doing so in part because they were the first psychologists to publish journals in economic …show more content…
The work by these two men brought Behavior Economics on the map. Economic theories in the past have based a lot of their theories off assumptions. Behavioral Economics dissolved some of those assumptions and people do not always perform rationally in terms of economic decisions. III) Section #3 – Modern Behavioral Economic Studies A. Topic Sentence – “historically, behavioral economists have relied on experiments to a great extent. Recent behavioral economics, however, has relied on an increasingly diversified and sophisticated set of methods that reflect its interdisciplinary heritage (Anger & Loewenstein, 2006).” The new gold standard for empirical evidence has become the randomized field experiment (Harrison & List, 2004). Does Experimental Economics hold any value in real Economic decisions? Are field studies better? B. Neuroeconomics brings Behavioral Economics closer to the foundations of BDR using neuroscience methods. This study uses different kinds of brain scans to observe and analyze individual’s economic conduct (Anger & Loewenstein, 2006). C. Light Paternalism is the study to help individuals make better selections that better serve the that persons interests without restricting sovereignty of choice of others (Thaler and Sunstein