ECON42260 Behavioural Economics

Academic Year 2019/2020

The purpose of this course is to provide a graduate level introduction to the principles of behavioural economics. In particular the module aims to:

- Introduce students to core areas of economics and psychology such as judgement, rational choice, intertemporal decision making, and emotion-based decision-making.

- Enable students to develop a detailed understanding of the key concepts of behavioural economics

- Provide a conceptual foundation to critically evaluate the role of behavioural economics ideas in public policy.


There is not a single textbook but readings will be provided for each lecture block.

Teaching will take the form of lectures and interactive tutorials. Extensive supplementary material will also be made available on Brightspace.

The course is divided into 8 blocks of lectures under the topic headings below.

1. Rational Choice Theory: What are the main concepts of rationality in economics? What is the nature of the debate about rationality in behavioural economics?

2. Judgement, Heuristics and Biases: How do people make judgements about risk and uncertainty?

3. Intertemporal Choice: What is the discounted utility model? Is it a reasonable descriptive model of intertemporal choice? What are the main alternatives? What is the cutting edge of research on how people making intertemporal choices?

4. Identity, Motivation and Incentives: How do factors such as fairness, social norms, and other related motivations influence economic decisions? How can such factors be studies experimentally and through other research designs? What are the potential implications for policy design?

5. Emotion and Decision Making: What is the role of emotional factors in economic decision making? In particular, we will outline classic models of "visceral effects" and demonstrate how such factors are studied. We will also examine the impact of a wide range of other emotions on economic behaviour and potential implications for public policy.

6. Well-being and economics: To what extent is consumption a good proxy for welfare and what role might measures of well-being play? This set of lectures will critically evaluate the extensive literature on well-being and economics.

7. Behavioural Theories of Consumption: This series of lectures will examine the main behavioural theories of consumption and, in particular, how consumption needs evolve over the course of economic development.

8. Public Policy, Law and Behavioural Economics: This series of lectures will describe the wide-ranging debates about the role of behavioural economic in public policy. We will draw from the previous lectures to describe in detail the academic background to the public debates about the role of "Nudging" and similar policies and provide the conceptual and critical foundations to evaluate the role of such polices across many areas of public policy.