The Evolution of Behavioral Economics

The Evolution of Behavioral Economics Author’s Name: Institution: Date: The Evolution of Behavioral Economics Differences between neo-classical and behavioral economic theory To begin with, unlike neoclassical economics, the latter type of economics does relatively more extensive studies on the way a rational decision-making process operates. Behavioral economics assumes that individuals have different unstable preferences which change according to the changes in context (Baker, and Ricciardi, 57). Also, this theory believes that people fairness do not matter, especially if it hinders their accessibility to what they need. Furthermore, behavioral economics views an individual's decision-making as being based on the type of information that they receive (Baker, and Ricciardi, 495). For instance, behavioral economics believes that supermarkets place candy, gums, among other small goodies at the cash registers they easily lure buyers to purchase them on an impulsive basis. On the other hand, neoclassical economics generally believe that more often than not, systematic errors emerge from poor computational skills, which in effect arise from people's efforts to make rational decisions. Also, neoclassical economics generally addresses multiple aspects of economics; thus; it does not restrain its interest on a single topic (Baker, and Ricciardi, 59). For instance, neoclassical economics believes that supermarkets provide discounts when customers buy goods in bulk as a strategy to increase their sales. On the contrary, behavioral economics believe that supermarkets position frequently purchased products behind their stores to increase their sales. Leading figures in the school of thought and their hypotheses, theories, works, and awards Some of the leading characters in the school of thought include but are not limited to Friedrich August, Milton Friedman, and Lawrence Robert. To begin with, Friedrich August (1899 to 1992) is known for earning two doctorates, one in political science and other in law. Queen Elizabeth II approved Friedrich's membership of the Order of the Champions of Honor (OCH). Friedman believed that fluctuating prices of commodities provides essential information that enables buyers to amend their spending habits. He further maintains that the price of a product is a significant aspect that communicates and serves as an economic indicator. This gave a fantastic contention with regards to free markets since controlling markets supported purchasers and business people alike to settle on poor venture choices, though free markets conveyed certainties about the real strength of the economy and accordingly what's to come. Hayek, unlike any other person in the twentieth century, kept the Austrian School in standard scholarly discourses of financial matters. Albeit now generally undervalued in left-inclining western countries, he has turned into the central financial expert for countries recuperating ...