Principles Of Economics Essay
“In the past few decades, the neoclassical view of human behavior has been challenged by a strong alternative called behavioral economics, which studies how individuals and organizations make economic decisions. Studies in this area suggest that a more sophisticated model of human motivations is required to explain behaviors such as those that lead to stock market swings, the ways that people react to good and bad fortune, and why people often seem to act against their own self-interest. Rather than making assumptions about human behavior, behavioral economics relies heavily on scientific experiments to determine how people behave in different situations. (p.147)”
An article on pbs.org titled Financial Crisis Illustrates Influence of Emotions, Behavior on Markets (6) interviewed Santa Clara University economics professor Hersh Shefrin about what behavioral economists thought about the great recession and the potential causes behind it. Shefrin-a behavioral economist himself- believed that the main view behavioral economists shared was that faults caused by economic flaws as a result of people are not as random as some may think. Much like the decisions they make these actions share common psychological factors, biases, and intellectual errors.
When it comes to who had the right idea about the great recession it all boils down to the same two economic viewpoints, those of…