This is the goal of behavioral economics, a field that uses psychological insight to understand economic decision making. Economics should be based more on how people really behave. But this unrealistic, and frankly simplistic, worldview does not advance economic understanding. Traditional economics posits a world where people act rationally and make economic decisions based on their own best interests. We have instincts that help us negotiate a complex world, and these instincts tend to channel us into repetitive behavior so that we don’t have to spend a lot of time making decisions about things that aren’t essential to our survival. There are predictable patterns in our behavior. As a matter of fact, we make the same mistakes over and over again, and there is nothing random about that. Just because we’re irrational, however, it doesn’t follow that we’re chaotic. Most of the time, we’re deeply irrational. Standard economic theory assumes that we are rational, but we are not. We’re really the victims of our own instincts and impulses. We think we’re in the driver’s seat and steering the course of our lives, but we are wrong. Most of the time we don’t understand what’s really going on.
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