Cours de Behavioral Economics

Richard Thaler, the Nobel Prize-winning economist who is considered the founder of this influential field, defined behavioral economics as “the combination of psychology and economics that investigates what happens in markets in which some of the agents display human limitations and complications.” Whereas traditional economics (known as the “standard economic model”) assumes that people are rational actors whose decision-making in the market is based purely on calculations of costs and benefits in pursuing one’s preferences, behavioral economics identifies important ways that this theory is challenged in reality by cognitive biases.

For example, individuals often lack the willpower to make choices in their long-run interest, even if they rationally understand the costs. People also often make altruistic sacrifices to help others, in contrast to purely rational actors that pursue only self-interest. These types of insights from psychology have been deepened in recent years by bringing in advances in our understanding of how the biology of the brain works, creating the closely related subfield of neuroeconomics.

These insights may seem like common sense, but they have important implications for business. Behavioral finance has helped explain how the stock market is influenced by biases such as “loss aversion,” which leads investors to fear losing money more than they value gains. Consumer neuroscience has yielded marketing insights on how memorable branding builds associations in the brain that impact purchasing decisions.

Behavioral economics and related fields can seem to some like an effort to “hack” the human mind for financial gain, particularly when used in marketing. However, leading theorists in this field such as Thaler have demonstrated that this experimental, science-based approach to economics can also help policymakers come up with policy interventions to “nudge” people towards making better long-term decisions such as eating healthier food and saving more of their money.‎

A background in behavioral economics can give you an edge in many types of business and marketing careers, as it helps deepen your understanding of the biases that influence the choices of other investors and consumers - as well as your own economic decision-making. This field is also useful for public policy careers, as accounting for the real-world insights of behavioral economics in policymaking can help make legislation and regulation more effective in achieving its goals.

If you want to dive deeper into this influential field and contribute to its fast-growing body of research, you can become an economist yourself. This career path typically requires an advanced degree such as a masters or even a PhD, but it can lead to work that is high paying as well as intellectually rewarding. According to the Bureau of Labor Statistics, economists earned a median wage of $105,020 per year in 2019, and these jobs are expected to grow faster than the average of the overall economy.‎

Absolutely, Coursera offers courses in behavioral economics, behavioral finance, neuroeconomics, and related fields in business as well as psychology. By learning online, you can learn about behavioral economics topics remotely from great schools like Duke University and Copenhagen Business School at a significantly lower price than on-campus students.

And, while your cognitive biases may predispose you to think that a lower price means lower quality, learners on Coursera get the same course materials and credits as on-campus counterparts, along with video lectures and live virtual office hours and collaborative projects. That means you don’t have to sacrifice the quality of your education to learn online, making this a very economically rational choice indeed.‎

The skills and experience you might need to have before starting to learn about behavioral economics include an understanding of taxation, finance theory, and behavioral science. Work experience in product management or client management may be useful. Other skills include data analysis skills, such as interpreting data and statistical analysis. Some additional coursework in psychology can be helpful, especially classes about cognitive psychology or neuropsychology. Courses that include experimental design, statistical analysis, and programming languages like SQL can be advantageous. You also may find it beneficial to learn about brain function and the parts that play a role in the decision-making process.‎

The people best suited for roles in behavioral economics are individuals who are passionate about understanding why people make economic decisions. They typically like to observe what others do, note trends in behavior, and develop hypotheses about why it’s happening. Behavior economists often enjoy applying their knowledge of experimental design to measure consumer behavior that organizations can use to inform decision making. For example, a company might want to know which features of a product are most important to its customers or why one particular model of a product does not sell as well as others.‎

Learning behavioral economics might be right for you if you're interested in applied psychology and topics like game theory, ostrich effect, and anchoring bias. You may find that you like learning behavioral economics if you enjoy setting up experiments to identify why people make economic decisions and sharing your insights with companies and other groups like marketers and product managers who want to put their products in the hands of as many consumers as possible. Working as a behavioral economist may interest you if you enjoy working with data and applying your insights to develop policies and strategies that align with an organization’s mission, values, and financial goals.‎