Behavioral Economics

Overview

Behavioral economics studies how psychological factors cause people to deviate from rational economic predictions. Where classical economics assumes rational actors, behavioral economics documents systematic biases and designs interventions (nudges) to improve decisions.

Framework

IRON LAW: Biases Are Systematic, Not Random

Behavioral biases are PREDICTABLE patterns, not noise. Loss aversion
doesn't sometimes make people risk-seeking and sometimes not — it
consistently makes people overweight losses relative to equivalent gains
(roughly 2:1 ratio). Use specific bias names and their documented effects,
not vague "people are irrational."

Core Concepts