Title: Behavioural Economics
Course objective: Behavioral Economics with Perspectives from Rabindranath Tagore's Philosophy and Basic Statistics
Take Away: By the end of this module, students will understand behavioral economics theories, apply Tagore’s philosophy to economic principles, master statistical tools like R or SPSS and analyze rural decision-making biases. They will explore neuroeconomics, AI’s impact, policy integration, and conduct research, applying insights to real-world behavioral and economic challenges.
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Course Outline:
Paper 1: Introduction to Behavioral Economics (6 hours)
Learning objectives: By the end of this module, students will understand key principles of behavioral economics, including Prospect Theory, Bounded Rationality, Loss Aversion, and Nudge Theory. They will critically compare classical and behavioral frameworks, apply concepts to real-world scenarios, and conduct a literature review on behavioral economics applications in health, finance, or marketing.
1.1Neo classical economics - Rational choice theory, Marginalism, Supply and demand, Perfect competition, Market efficiency. Criticisms of Neo classical theory.
1.2. Prospect theory by Daniel Kahneman and Amos Tversky,
Reference Point, value function, Probability weighting, Loss aversion.
1.3 Bounded Rationality: Herbert Simon
Limited Cognitive Capacity, Imperfect Information, Time Constraints, Satisficing, Heuristics and Biases.
1.4 Loss Aversion: Daniel Kahneman and Amos Tversky
Asymmetric Valuation of Gains and Losses, Endowment Effect, Status Quo Bias, Risk-Seeking Behavior in Loss Frames.
1.5 Nudge Theory: Richard Thaler and Cass Sunstein
Choice architecture, Default options, loss aversion, social norm, salience.
- Short-term project: Literature review on the applications of behavioral economics in a specific field (e.g., health, finance, marketing) (2 days)
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Paper 2: Rabindranath Tagore's Philosophy and Behavioral Economics (6 hours)
Learning objectives: Students will explore Rabindranath Tagore’s philosophy in the context of behavioral economics, focusing on human freedom, creativity, interconnectedness, Swadeshi, and distributed economy. They will analyze how his ideas apply to decision-making, collective welfare, and economic self-sufficiency, culminating in a short-term project linking his philosophy to behavioral economic principles.
2.1. Human freedom and decision making.
2.2. Creativity and economics.
2.3. Interconnectedness and collective good.
2.4. Swadeshi or Self sufficiency and its relevance to Behavioral economics.
2.5. Distributed ecomomy.
- Short-term project: Analyze how Tagore's philosophical ideas can be applied to behavioral economics and decision-making (2 days)
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Paper 3: Basic Statistics in Behavioral Economics (6 hours)
Learning objectives: Students will learn descriptive and inferential statistics, correlation and regression, non-parametric methods, and time series analysis. They will apply statistical techniques to behavioral economics, analyzing datasets using software to identify trends, relationships, and patterns, culminating in a practical short-term project on data-driven insights.
3.1. Descriptive statistics - Descriptive statistics reveal patterns of cognitive biases, such as overconfidence or anchoring, by summarizing decision-making data from experiments.
3.2. Inferential Statistics.
3.3 Correlation and Regression.
3.4 Non Parametric statistics.
3.5 Time series analysis.
Short-term project: Analyze a dataset using statistical software to identify trends and correlations (2 days)
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Paper 4: Introduction to Behavioral Economics of Rural Economies
(6 hours)
Learning objectives: Students will explore behavioral biases, heuristics, financial decision-making, and technology adoption in rural economies. They will analyze policy decisions and agro-counseling within a behavioral economics framework. Using statistical software, students will identify trends and correlations in rural economic data through a short-term project to derive actionable insights.
4.1. Behavioral biases and Heuristics in Rural Economies.
4.2. Financial decision making in rural economies.
4.3. Technology adoption and behavioural economics.
4.4. Policy decisions and behavioural Economies.
4.5 Agro counseling.
Short-term project: Analyze a dataset on rural Economies using statistical software to identify trends and correlations (2 days)
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5. Advanced Topics in Behavioral Economics (6 hours)
Learning objectives: Students will explore advanced concepts in behavioral economics, including neural mechanisms of decision-making, neuroeconomic models, and AI applications. They will examine the integration of behavioral insights into policy decisions and conduct a literature review on cutting-edge research in neuroeconomics or behavioral finance through a short-term project.
5.1. Key concepts and applications.
5.2. Neural mechanisms of decision making.
5.3. Neuroeconomic models and theories.
5.4 Policy decisions.
5.5 AI in Behavioural Economics
Short-term project: Literature review on the current state of research in neuroeconomics or behavioral finance (2 days)
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Assessment:
- Class participation and engagement (20%)
- Short-term projects (40%)
- Mid-term exam (15%)
- Final exam (25%)
_Recommended Readings:_
- Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263-292.
- Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving decisions about health, wealth, and happiness. Penguin.
- Tagore, R. (1917). Nationalism. Macmillan.
- Wooldridge, J. M. (2013). Introductory econometrics: A modern approach. Cengage Learning.
Some Internship projects:
Project Themes on Behavioral Economics
Nudging Healthy Behaviors: Investigate how small environmental changes, such as food placement or calorie labeling, influence healthier eating choices.
The Power of Defaults: Study the impact of default options in settings like savings plans, subscription renewals, or organ donation participation.
Social Norms and Behavior:
Explore how leveraging social proof or peer comparisons can encourage actions like energy conservation or increased charitable giving.
Framing Effects in Decision-Making Analyze how different presentations of the same information (e.g., gains vs. losses) affect choices in areas such as insurance, investments, or healthcare.
Overcoming Cognitive Biases:
Design interventions to mitigate biases like procrastination or overconfidence in contexts like studying, time management, or financial planning.
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Behavioral Economics combines insights from psychology and economics to understand how individuals make decisions. This field is increasingly being applied across various industries to improve decision-making, design better policies, and enhance business outcomes. Here are career opportunities in different sectors:
1. **Business and Marketing**
In this sector, professionals can work as Consumer Behavior Specialists, Marketing Strategists, or Product Designers. Behavioral economists help businesses understand customer behavior, optimize pricing strategies, and design effective marketing campaigns. Applications include crafting advertisements that align with psychological triggers and designing loyalty programs based on consumer decision patterns.
2. **Finance and Investment**
Roles in this sector include Behavioral Finance Specialist, Risk Analyst, and Wealth Management Advisor. Behavioral economists analyze biases in investment decisions and develop strategies to mitigate irrational behaviors. Applications include understanding market anomalies, designing tools to help clients make better financial decisions, and analyzing investor behavior.
3. **Public Policy and Government**
In public policy, professionals may work as Policy Advisors, Behavioral Insights Specialists, or Program Evaluators. Behavioral economists design policies and interventions that nudge individuals toward better choices. Applications include encouraging healthy lifestyles, improving tax compliance, and increasing participation in public programs through default settings or framing techniques.
4. **Healthcare**
Career opportunities in healthcare include Behavioral Health Consultant, Policy Analyst, and Program Designer. Behavioral insights are used to influence healthier choices and improve patient compliance. Applications include designing programs to reduce smoking or obesity, encouraging timely vaccinations, and improving medication adherence.
5. **Technology and Product Design**
Behavioral economists in this sector may work as UX Designers, Behavioral Data Scientists, or Product Managers. They contribute to creating intuitive interfaces and improving user engagement. Applications include optimizing website or app designs for better user experiences and reducing decision fatigue through simplified options.
6. **Corporate Strategy and Human Resources**
Professionals in this area can work as Organizational Behavior Consultants or Employee Engagement Specialists. Behavioral economics is used to improve workplace productivity and decision-making. Applications include designing incentive structures for employees and enhancing team collaboration through behavioral interventions.
7. **Education**
In education, roles include Education Policy Analyst and Learning Designer. Behavioral insights help in creating educational policies and designing effective learning environments. Applications include increasing student engagement through gamification and reducing dropout rates by addressing behavioral barriers.
8. **Non-Profit and Development Sector**
Behavioral economists can work as Behavioral Researchers or Program Developers. Non-profits use behavioral economics to influence behaviors for social good. Applications include promoting environmentally sustainable practices and designing donation campaigns to maximize contributions.
9. **Consulting**
In consulting, professionals may work as Behavioral Consultants or Change Management Specialists. They advise organizations on how to apply behavioral insights to improve processes and outcomes. Applications include enhancing customer retention and improving operational efficiencies through behavioral designs.
10. **Behavioral Research and Academia**
This field also offers opportunities as Researchers, Behavioral Scientists, or Professors. Professionals conduct experiments and research to further understand human decision-making. Applications include exploring cognitive biases, publishing findings to guide industry and policy, and conducting academic research.
Key Skills for Behavioral Economics Careers
Key skills include a strong foundation in psychology and economics, expertise in experimental design and data analysis, the ability to communicate complex ideas effectively, and proficiency in behavioral frameworks like nudge theory.
Behavioral Economics is a rapidly growing field with applications in virtually every industry, making it an exciting and versatile career choice.
