Behavioral economics- A solution to modern day problems in the World Economy

In the light of the development of economics over the centuries, have developed to a broad spectrum of knowledge. The understanding of the systems and the establishments within the domestic economy, the broad spectrum of economics have helped in bringing in some amount of sense in terms of the activities which bring revenue to the nation. This was pretty much enough, till the late 1980s. The aspect of behavioural economics is said to have taken an important role in understanding economics more in line with the behaviour of societies as a whole.

Dan Ariely is said to be one of the finest behavioural economists, has come up with a major finding in terms of the decisions that we take daily. His important findings regarding the behaviour of the people in general in times of the pandemic is quite startling. He points to the fact that humanity in general is not ready in terms of handling a severe situation like the pandemic.

Behavioural Economics take on the issue

This branch of economics has become an important subject of discussion in the general economic forum. Since the normal economic theories and notions have been completely defined in terms of the real-world scheme of things. It has become more evident that the impact or the importance of human behaviour and tendencies have become an important focal point in terms of the economic conditions prevalent today. As a result of this, behavioural practitioners have been able to point out the significant number of trends and the kinds of policies that need to be formulated to tackle the problems of today.

In most cases, one must have always believed in the notion that market behaviour tends to correct itself- but in reality, it is not so. Most of the time, the series of market decisions made are kind of flawed and they tend to accumulate over a while. The situation becomes more of a bigger problem which is a very difficult path to navigate through.

Cognitive biases in humans- Hindrance in decision making

Humans are known to be one of the species blessed with the aspect of intelligence’. This is also combined with the cognitive skills which depending on its levels showcases how one is superior to one another. As per many of the studies in behavioural science, studies have shown the aspect of making their lives more comfortable. This could include aspects like implements, tools or machinery to improve or magnify our capabilities. But the same sadly is not being put in place in designing our future course of life in terms of retirement plans, investments, insurance schemes and so on. Here, in these aspects, if we could implement some of the behavioural insights, peoples ‘lives could change for the better.