wunder beta🧠 Behavioral Economics 101
Why real people break the rules of the rational economist.
What you’ll learn
- Understand why real human decisions depart from the rational-actor model and the role of heuristics and dual-process thinking.Behavioral economics blends psychology and economics; Kahneman, Tversky, and Simon showed people use bounded, shortcut-driven reasoning rather than perfect calculation.
- Explain prospect theory and the core biases of loss aversion, framing, and anchoring.People judge outcomes against reference points, feel losses more than gains, and are swayed by how choices are framed and by arbitrary numerical anchors.
- See how behavioral insights become nudges, defaults, and real public policy.Choice architecture, defaults, and mental accounting reveal how presentation shapes behavior, and how governments apply nudges at scale.
Questions this course answers
What does the availability heuristic describe?
The availability heuristic leads us to overweight events that are easy to recall, like dramatic plane crashes, regardless of true frequency.
In Kahneman's framework, which describes System 2 thinking?
System 2 is the slow, effortful mode that handles tasks like deliberate calculation, while System 1 is fast and automatic.
Herbert Simon's idea that people choose a good-enough option rather than the optimal one is called:
Satisficing means searching only until an acceptable option appears, a consequence of bounded rationality.
Prospect theory's loss aversion means that:
Kahneman and Tversky found the pain of a loss is felt roughly twice as strongly as the pleasure of an equal gain.
The framing effect shows that:
Describing the same outcome as a gain versus a loss can reverse people's preferences, as in the lives-saved versus lives-lost experiment.
Anchoring causes people to:
An initial value, even an irrelevant one, pulls subsequent estimates toward it, and adjustments away tend to be insufficient.
Grounded in trusted sources
- Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263-291.
- Kahneman, D. (2011). Thinking, Fast and Slow. Farrar, Straus and Giroux.
- Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving Decisions About Health, Wealth, and Happiness. Yale University Press.
- University of Chicago News, 'What is behavioral economics?' https://news.uchicago.edu/explainer/what-is-behavioral-economics
- Santa Clara University, Leavey School of Business, 'What Is Behavioral Economics?' https://www.scu.edu/business/blog/business-concepts/what-is-behavioral-economics/
Every Wunder lesson is built from real, reputable sources — never invented.
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