Behavioural Economics and Finance
Routledge – 2012 – 310 pages
Standard models in economics and finance usually assume that people are rational, self-interested maximisers, effectively co-ordinated via the invisible hand of the price mechanism. Whilst these approaches produce tractable, simple models, they cannot fully capture the uncertainties and instabilities that affect everyday choices in today’s complex world. Insights from the other social and behavioural sciences can help to fill the gap and behavioural economics is the subject which brings economics and finance together with psychology, neuroscience and sociology. Behavioural Economics and Finance introduces the reader to some of the key concepts and insights from this rich, inter-disciplinary approach to real-world decision-making.
"This new next, Behavioural Economics and Finance, by Michelle Baddeley, is a useful introduction into an ever-expanding area from which we can expect many other primers to emerge in the next decade." - Jason F. Shogren, University of Wyoming, Journal of Economic Literature
Part I: Background 1. Introduction 2. Foundations: Psychology 3. Foundations: Neuroscience and Neuroeconomics Part II: Behavioural Microeconomic Principles 4. Learning 5. Socially and Identity 6. Heuristics and Biases 7. Prospects and Regrets 8. Personality, Moods and Emotions 9. Time and Plans 10. Bad Habits Part III: Macroeconomics and Financial Markets 11. Financial Instability 12. Behavioural Macroeconomics, Happiness and Wellbeing
Michelle Baddeley is Fellow and Director of Studies (Economics) at Gonville & Caius College, Cambridge University, UK. Her current research is sponsored by the Leverhulme Trust and focuses on blending economic theories about herding and social learning with psychological and neuroscientific evidence.