Rephrasy vs SupWriter

Yet small purchases, the type of which occupy most of the economic space, contribute and are the sole extent of many people’s economic decisions, often these trivialities are the only money most people allocate. Even so, I think that these trivialities can reveal a lot about an individual. I began to wonder “where do our utility functions come from?” Why do we believe that things are useful and effective in certain contexts? Why do people have seemingly irrational allocation of budgeting? I decided to dig deeper in order to answer these questions.

Behavioral economics appeals to me because of a quality it shares with classical economics. It helps us to understand the way people actually behave, rather than wish they behaved. Behavioral economics brings to the table a crucial factor that classical economics does not: context. I want to contribute to this emerging field that offers a greater respect for how our real choices are both made and affected, and how social forces interact with the forces of nature.

I am particularly interested in a view of economics that incorporates assumptions about human behavior that are more realistic than the view that economic agents have complete knowledge and act rationally to maximize their utility. Instead, I believe that there are actually psychological constraints on the optimality of decisions, and these constraints result in economic outcomes that are systematically suboptimal. Studying and understanding these deviations from the ideal allows us to introduce more practical theories of behavior and better policies. Who decides, what do they know, and what do they believe?

Studying behavioral economics will allow me to answer this question by applying rigorous quantitative methods to questions that illuminate human behavior. I want to continue developing quantitative skills and to uncover theoretical insights that relate directly to human decision-making processes. I would apply these skills to economic interventions, ultimately understanding how contextual nuances affect the results of these interventions in the real world.

In finance, the role of irrationality is very salient, and there is a lot of evidence that sophisticated investors regularly make decisions that are unwise. Behavioral economics asks why consumers make bad decisions, and at the same time, how economics can account for those poor decisions as they happen in everyday life. I want to study psychology alongside economics to examine the literature on irrationality, evaluate its potential to explain undesirable choices, and explore solutions to problems arising from behavioral biases.

As I was trying to save some money, I noticed for the first time a gap between what people intend to do and actually do. I had set a specific budget, had good reasons to follow it and intended it to stick. However, minor expenses continued to accrue. I did not just make poor decisions; I made poor decisions knowing full well that they were poor decisions. I wondered how many seemingly irrational choices are in fact predictable reactions to the way the choice is framed.

Behavioral economics piques my interest because it treats that question seriously. Human beings are capable of modifying their thinking and response patterns through mental strategies, training, and rehearsal, as established by cognitive and behavioural psychologists. Behavioral economics takes these influences into account. I am interested in studying people’s decisions in real life, not just how they would decide in an ideal world.

I’m especially interested in the difference between helping people make better choices and just telling them what to do. A well-designed prompt, a clearer comparative presentation of options or a change to a default can ease an important decision without removing anyone’s freedom. The prospect excites me, but also raises questions I want to interrogate:who determines whether this is a “better” one? When does influence cross over into manipulation? How can scientists tell whether something works beyond a single experiment?

Studying behavioral economics would equip me to explore these questions more deeply. I am interested in learning about designing experiments, appraising evidence and linking psychological findings to economic analysis. I’m particularly interested in applying those skills to personal finance, an area where small decisions repeated over time can have sizable effects and where a lack of advice is often not the issue.

My budget experience didn’t give me an answer, but it gave me a question that has stayed with me. People have trouble acting on what’s important to them. How can we make it easier for them to act? I am eager to study behavioral economics because it allows a scholar to answer that question while having a genuine curiosity about human behaviour as well as a commitment to improving everyday decisions.