Behavioral Economics and Behavioral Finance are closely related fields making up a separate branch of economic and financial analysis using social, cognitive and emotional factors in understanding the economic decisions of consumers, borrowers and investors, and their effects on market prices,returns and the resource allocation.
In below video, MacArthur winner Sendhil Mullainathan uses the lens of behavioral economics to study a tricky set of social problems — those we know how to solve, but don’t. We know how to reduce child deaths due to diarrhea, how to prevent diabetes-related blindness and how to implement solar-cell technology … yet somehow, we don’t or can’t. Why?
Sendhil Mullainathan asks a compelling question: what are the irrational choices we make that perpetuate poverty, corruption, discrimination ?
About Sendhil Mullainathan and why you should listen to him
To study big questions such as “What are the measurable effects of corruption?”” Sendhil Mullainathan and his collaborators look at the day-to-day decisions made by real people, running deep-data studies on groups around the world to tease out patterns. Awarded a MacArthur “”genius”” grant in 2002, he has produced and collaborated on a string of research papers that make for a must-read CV — including a fascinating, if dispiriting, study of the corruption involved in getting a driver’s license in India.
Lately he and his team have been studying women who sell fruit and vegetables on the streets in developing countries. They’re usually in debt to a moneylender in the market, who takes about half their profits each day as interest. Some of the women have figured a simple way to get out of debt and keep all their profits. But most of the women make a choice every day that keeps them in debt. How would these businesswomen behave, he wondered, if the slate was wiped clean? So he got a grant, paid off their debt, and waits to see what happens next.”
Source : Ted