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Behavioral Economics



I need to inform you about the classic economy, but it is a long story and probably you will get bored as you read that, that is why I try to explain the behavioral economics. Actually, it is your life, your choices. Do you ever think why people prefer expensive stuff, generally? That is the behavioral economics. According to 80% of people, they seem richer with their expensive goods. Do you agree with them? I'll give an example: to go out and look at sitting people at coffee shops. If they have an expensive phone then they put them(the phones) on the tables. For what? For social status. Social status is everything that makes a human a human. We pick our friends, our life friends( husband or wife), our houses, our favorite coffee shops, etc. according to our social status. In short, Social status is really the life. 

Brains of people work differently from animals, it that right? No! Status is very important in the forest life, too.  If you pay attention, male animals fight each other for female animals or some regions. A winner can do everything after fighting because it proves its status in front of other animals. Namely, Status is important everywhere, every time.  



Did you see that? It is real, not joke. The wealthy people assign their wealth to their children expect their mistresses as they are dying. I am sorry for being low-jawed but I had to say that. Anyway, I want to come back to the main subject again. Behavioral economics is popular topic in the business environment and the university environment now. Many economist research that and they try to solve people behavior. 


Daniel Kahneman is an author and a scientist at the University of MIT. He has researched behavioral economics for 30 years and 5 years ago, he got Nobel Prize in the economy. He experimented with 100 people over and over. There were 2 people there, they had the different role each other. The topic was: one person was given 20 dollars by them ( Experts) and that person had to share that money with another person but there was no limit. Another person knew everything. I'll give names to them, 1. person's name is X, 2.person's name is Y. X offered 1 dollar to Y. Normally, according to the classic economy, Y should have accepted that proposal but Y rejected that. Why? Y thought, if I accept that money then X will get 19 dollars, that is why I will reject his proposal. Briefly,  Y thought selfishly. It is normal because people always think the same way. It is behavioral economics. All of the friend influence with their buying goods all the time. Someone is buying a new model phone and then everyone wants to buy these phones. Therefore, social status is the very strong effect on people.   

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