In his book ‘The Theory of Moral Sentiments’, Adam Smith wrote: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.” What he wrote in 1759 can be traced as the foundation of behavioural economics, a field that lies at the cusp of psychology and economics.
A wide set of our choices are driven and limited by our cognitive ability, attention and motivation. We all are habitué in missing the deadlines; we get impatient and often procrastinate. Over the last decade or so, these behavioural aspects of human behaviour have been incorporated into mainstream economics.
Insights from behavioural economics can help us answer several important questions. (To read the rest of the article, click here.)