A Realistic Economics of the Consumer Requires Some Behavioral Economics: Neoclassical Economics vs. Behavioral Economics

Abstract

Behavioral economics gives us a better understanding of the current world, in which we are living. The author talks about behavioral economics and how it can be used to determine better outcomes in the economy rather than standard economics. One of his arguments is that standard economics or neoclassical economics does not have room for improvement because all theories and equations are already fixed in order to maximize the outcome of the individual or the companies. Behavioral economics will not try to work as a substitute for neoclassical economics; on the other hand it will give it the necessary tools to improve the decision-making of each individual in our society as well as for companies. In everyday life individuals encounter many decision-making scenarios, which appear to have the best outcome for them. However, people do not take into account the fact that as humans, people are bound to commit errors. In the main paper, the author talks about how economists perceive the 10 principles of economics and how behavioral economics in general interacts in daily life. The author talks about the functions of behavioral economics for Understanding Economic Trends in One Place at One Time, Predicting Economic Trends, Assisting Economic Policy, and Improving Economic Theory. These are just a few of the many aspects that behavioral economists' research and that he focused on the development of this paper. In conclusion the theory behind neoclassical economics provides good ground for economists to see the world as they want it to be. Behavioral economics on the other hand changes this perspective and give a new meaning to reality.