Behavioral economics and why we consider economics more of a behavioral science.

Full Answer Section

      This understanding shifts economics closer to a behavioral science. It acknowledges the human element, making predictions more nuanced and applicable to real-world scenarios. By analyzing biases and heuristics, we can design interventions ("nudges") that encourage better choices, from saving for retirement to adopting healthier habits. This shift paves the way for a more holistic understanding of how individuals and societies function, making economics not just about numbers, but about the messy, fascinating reality of human behavior.

Sample Answer

    While traditional economics assumes perfectly rational actors making optimal choices, my understanding of behavioral economics challenges this view. It delves deeper, recognizing the influence of psychology, emotions, and social factors on our decisions. We see this in loss aversion, where we fear losing more than gaining the same amount, or in anchoring, where initial information biases our judgments. These "boundedly rational" behaviors explain why we don't always follow the logic of traditional models.