Behavioral Economics in the Wild
Behavioral Economics is a sub-field of economics that, relying on insights from psychology and decision-making, aspires to describe actual behavior with greater empirical accuracy and psychological realism than that implied by the standard neoclassical model. In this course, we will investigate the success of this approach in explaining ostensible anomalies in the "wild" such as under-savings for retirement, over-consumption of unhealthy food, extreme aversion to losses among investors, workers, and home-owners, the over-confidence of corporate CEOs and NFL general managers, and the influence of emotions on domestic violence, stock market activity, and risk-taking. We will first document and review the underlying theory for three conceptual departures from the standard model -non-standard preferences (e.g., present-bias, reference dependence), non-standard beliefs (e.g., overconfidence, gambler''s fallacy), and non-standard decision-making (e.g., heuristics, emotions, framing effects)-and then quickly move to assess the evidence for these claims in field settings. We will additionally explore how markets respond to behavioral biases, and discuss recent research in behavioral policy with an emphasis on policies aimed at increasing savings, improving food choice, and heightening program take-up and compliance. The course will be paper-centric and we will review a variety of popular empirical methods from field experiments to quasi-experimental approaches (e.g., estimation through regression-based panel analyses, difference-in-differences, and instrumental variables). Student evaluation will be based on performance on problem sets, an exam, as well as a short class presentation of an empirical paper of choice.
By the end of the course you should be able to:
- understand how insights from psychology and decision-making might supplement traditional neo-classical economic thought and enrich emergent policy prescriptions
- digest and critically evaluate the research design, methods, and findings of the empirical literature, and, finally
- translate your evaluation into coherent and structured written form.