SUBJECT

Economic Psychology

lecture

master

Faculty of Education and Psychology

4

Semester 2

Spring semester

Aim of the course:

Behavioral Economics has become a very popular field, because the traditional view of the economic agent as a rational utility maximizer was not able to explain and predict economic behavior. On the basis of psychological decision making models, which take into account the cognitive limitation, emotions and the social embeddedness of people, a more effective explanation and prediction of economic decision could be formulated.  This view takes into account that people live in a very complex environment where they must face an overwhelming amount of decision situation and information which overloads their cognitive capacity. In this environment people use various short-cuts (heuristics) for making decisions and judgments. Those short-cuts can work very well, but sometimes lead us to make poor decisions. The overwhelming number of alternatives makes difficult to be consistent about preferences as well. Judgements based on the superficial characteristics of the environment allow for the manipulation of peoples’ economic decisions. The possibilities to help people to make economic decision which better represent peoples’ real interests will be discussed

Learning outcome, competences

knowledge:

• Students will be able to understand and analyze
• the process of the decision making
• the main theoretical and practical approaches in the field ofBehavioral Economics
• Students will be able to analyze individuals’ economic behavior, recognize inconsistencies and manipulation

attitude:

• openness to interdisciplinary approach
• recognizing the societal importance of decisions
• critical thinking

skills:

• help individuals, organization and policy makers to make better choices and policies
• apply the scientific and practical methodology of the field

Content of the course

Topics of the course

• Approaches and themes of economic psychology. Decision making: concept and structure , the question of rationality
• The limits of knowing the world. (Mis) judging probabilities, heuristics,
• The inconsistencies of preferences, prospect theory, the relativity of evaluation
• The inconsistencies of preferences: is more better? Counterfactual thinking
• Consumer decision making . Choice between alternatives
• Consumer motivation. The psychology of possession. The role of time in decision making Self control,
• The role of values and emotions in decision making. Intuitive or analytic thinking.
• The critic of the heuristic approach. Naturalistic decisionmaking.
• The effect ofsocial norms on decisions. Ethic and moral consideration. Tax paying and tax avoiding
• The importance of fairness, the role of trust in economic life
• Risk perception, risk taking and risk communication
• What is the value of economic psychology for economics? Can peoples’ economic behavior be helped?

Learning activities, learning methods

• Lecture, demonstrations and exercises,
• project work,
• analysis of case studies
• readings

Evaluation of outcomes

Learning requirements, mode of evaluation, criteria of evaluation:

requirements

• knowledge of the course material and the readings
• participation and oral and written presentation of the project work,

mode of evaluation:

• exam
• evaluation of the contribution in the project work

criteria of evaluation:

• exam 70%
• project work 30%

Compulsory reading list

• Kahnemann D. (2011) Thinking fast and slow Farra, Straus and Giroux, New YorkISBN 978-0-374- 27563-1

• Thaler R. Sustein (2008)Nudge .Pinguin Books, ISBN 978-0-14-311526-7

• Gigerenzer G. (2007)  Gut feelings: The Intelligence of the Unconscious Viking Adult ISBN 0670038636

Recommended reading list

• Ariely D. (2008) Predictably Irrational An Imprint ofHarperCoMinsPublishers ISBN: 978-0-06-135323-9

• Gilovich, T. (1991)  How We Know What Isn't So: The Fallibility of Human Reason in Everyday Life ISBN-10: 0029117062