Behavioral economists generally see people as imperfect decision‑makers : not stupid, but emotional, biased, and heavily influenced by context, habits, and social cues, rather than as perfectly rational calculators.

Core view: “Humans, not robots”

Traditional economics assumes “rational actors” who always maximize their own benefit with clear preferences and good information.

Behavioral economics argues that real people:

  • Have limited attention and mental energy (bounded rationality).
  • Use mental shortcuts (heuristics) that can systematically mislead them.
  • Care about fairness, social approval, and norms, not just money.

A classic example: many people know saving for retirement is good, but still don’t enroll in a pension plan or 401(k) unless it’s the default option.

Key ideas about how people differ from “rational” models

Behavioral economists focus on patterns of predictable mistakes , not random errors.

Common themes:

  1. Cognitive biases
    • Loss aversion: losses feel worse than equal gains feel good, so people avoid losses even when it hurts them overall.
 * Present bias: people overvalue now and undervalue later, leading to procrastination (dieting “tomorrow,” saving “later”).

 * Framing effects: choices change when the same information is framed as a gain vs a loss or in different wording.
  1. Heuristics (mental shortcuts)
    • Instead of carefully calculating, people rely on simple rules of thumb, like “follow what others do” (social norming) or “avoid regret.”
 * These shortcuts usually work but can lead to systematic errors in complex situations (e.g., risky gambles, credit decisions).
  1. Emotions and social factors
    • Mood, fear, excitement, and peer pressure influence choices in markets, voting, health, and consumption.
 * People care about identity and values, not just prices—for instance, buying ethical products or boycotting brands.

What they do with this view

Because people don’t behave like idealized “rational” agents, behavioral economists:

  • Build models that include biases, emotions, and social norms to better predict real behavior.
  • Design policies and products that “nudge” people toward better choices without forcing them (e.g., automatic enrollment in savings, clearer labels on foods).
  • Test decisions experimentally (lotteries, choice tasks, field experiments) to see where people make mistakes and what principles they want to follow.

A typical illustration: changing a form so that “organ donation” or “retirement saving” is the default option can massively raise participation, even though nothing else changes.

In one line

Behavioral economists see people as systematically irrational but predictably so —deeply human, shaped by bias, emotion, and context, and therefore needing better environments and choice designs, not just more information.

Information gathered from public forums or data available on the internet and portrayed here.