How to Have a Good Day: Harness the Power of Behavioral Science to Transform Your Working Life pdfdrive com

ECONOMICS: MORE REALISM IN THEORIES OF
BEHAVIOR
At the same time, economics has also moved toward a more rounded view of the
human condition. At its heart, economics is the study of the way people make
choices: how we weigh the costs and benefits of different options, and what we
decide to do as a result. The choices might be mundane, like deciding which
snack to buy, or they might be consequential, like deciding which multimillion-
dollar project goes forward. Either way, to predict people’s choices, economists
used to build theoretical models that assumed humans always accurately and
independently assessed the benefits of each option open to them. But those
models weren’t able to explain a lot of real-life behavior: for example, the way
we often make snap decisions based on little information; the fact that we
sometimes change our minds, based on what others think; the way we

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occasionally do nice things for other people without any expectation of payback.
This spurred two psychologists—Daniel Kahneman of Princeton and Amos
Tversky of Stanford—to cross enemy lines in 1979 and publish an article in
Econometrica
, an influential economics journal. In the article, they highlighted
that people 
don’t
behave like machines when it comes to the choices they make.
2
Emotional and social considerations drive many of our choices, often for good
reason and in quite predictable ways. And with that, they sparked a revolution.
Soon there was a new movement called “behavioral economics” that was
devoted to applying the powerful analytical tools of economics to the way that
real people make decisions in the real world. The result? Well, Kahneman went
on to win the Nobel Prize in Economics in 2002. But more important for us is
that economists now have a much more nuanced and accurate understanding of
the choices we make from day to day, and what it takes for us to nudge our
behavior one way or another.