Thread by @UmemaSiddiqi

Let's learn a few things about Behavioral Economics and Behavioral Science

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Behavioral Economics focuses on how behavior affects economic decisions and outcomes, while Behavioral Science focuses on the study of behavior more broadly and its influences across multiple domains.

While they are related, they differ in their scope and focus.

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Behavioral economics (BE) emerged as a response to the traditional assumption that people are perfectly rational and make decisions based solely on self-interest. It recognized that people's decisions are often influenced by factors such as framing, heuristics, and biases.

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Behavioral science, on the other hand, is a broader field that encompasses behavioral economics as well as other disciplines that study human behavior, such as psychology, sociology, and neuroscience.

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Behavioral science aims to understand the psychological, emotional, and social factors that influence behavior across a wide range of domains, including health, finance, and the environment.

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The field of BE was largely shaped by the work of Nobel Prize-winning economists such as Herbert Simon, Dan Kahneman, & Richard Thaler. Simon's work on bounded rationality demonstrated that people have limited cognitive abilities & cannot make perfectly rational decisions

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Kahneman's research on cognitive biases and heuristics showed that people often make systematic errors in judgment and decision-making. Thaler's research on nudges and choice architecture demonstrated how the design of choice environments can influence people's behavior.

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These insights have led to the development of new theories and models in BE that incorporate psychological insights and incorporate factors such as fairness, social preferences, and bounded rationality into economic analysis.

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The field has also led to the growth of the "nudge" movement, which aims to design policies that use gentle persuasion to influence people's behavior, rather than relying on mandates or incentives.

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