You are here: Home Knowledge Base How to Design Policies for Humans Rather than Homo Oeconomicus? Virtual Library Psychology and Economics: Evidence from the Field
Symposium 2015

Virtual Library File - Psychology and Economics: Evidence from the Field

The Challenge

Most human thinking is automatic, not deliberative. It is based on what effortlessly comes to mind. Human thinking is also socially conditioned.  Beliefs about what others are doing and expecting sha ...

Most human thinking is automatic, not deliberative. It is based on what effortlessly comes to mind. Human thinking is also socially conditioned.  Beliefs about what others are doing and expecting shape an individual’s own preferences. And humans don’t face situations as “tabula rasa,” but instead interpret situations against the backdrop of their own understandings shaped by culture and existing social patterns.

Scientists have gathered impressive evidence for choices deviating from the standard model of economics. This paper surveys the most relevant empirical evidence on different classes of deviations. Nonstandard preferences, nonstandard beliefs and nonstandard decision making are discussed. In particular, the focus lies on time, risk and social preferences. Regarding beliefs, overconfidence, the law of small numbers, and the projection biased are presented. Finally, nonstandard decision making covers framing, limited attention, menu effects, persuasion and social pressure, and emotions. Methodologically, evidence is drawn from field, natural, and laboratory experiments. The evidence covers a broad set of (policy) applications, including consumption choices, finance, charitable giving, and labor supply.