Hello New Community,
First of all, I want to be one of the first to write in this new community, as I see that this may be the sixth post on this community if no one precedes me and publishes before I finish writing.
In fact, I was looking for the impact of emotions on purchasing processes and the economy in general, as sometimes I find myself with the same money and resources, but the result is different in buying and selling processes and e-commerce, even though I make sponsored ads with almost the same amount every time.
And I discovered that this is not just a topic or some people's opinions, but it is an economic theory that has been around since old times, and Thaler won the Nobel Prize for it about 8 years ago, and I decided to read more about that theory and I will try to summarize for you what I have reached.
Behavioral economics is a type of economic that is interested in understanding human behavior in making economic decisions, but in a different way from traditional economics because people behave like completely rational machines, meaning they make decision based on logical and objective calculutions. But in reality, this does not always hapen because there are many things that affect this.
In behavioral economics scientists thinks that people do not always act rationally because other factors affect their decisions such as emotions, cognitive biases, and biases that make people make decisions that are not always correct or ideal.
For example, there are two things that I have read about:
- Cognitive bias: This is when a person bases his decisions on incomplete information or has irrational biases. Like when someone has a fixed opinion about a certain thing and is unable to see new facts that might change his opinion.
- Time inconsistency: This happens when people have trouble making longterm decisions meaning they want something now even if it is not healthy or beneficial in the long run. Like when someone decides to eat extra sugary things knowing that it is not healthy but they are unable to resist the urge of the moment.
Behavioral economics tries to study and understand these effects in order to be able to explain why people behave in this way and then tries to develop economic policies that help improve decisions. For example the government can use ideas from behavioral economics to encourage people to save or make healthier decisions meaning changing the environment indirectly encourages people to do better things.
Behavioral economics says that people are not always rational as traditional economics assumed, and this makes us need to think of new ways to understand human behavior and make better decisions. The best solution to make a sound economic decision is to be in an excellent psychological state and exclude any theories or emotions from your brain or any biases because here, for example, you are not making a decision like Elon Musk or Bill Gates, the celebrities you emulate you are making a decision for yourself so you must be aware of that.
