88-667 Behavioral Economics in the Wild
12 units, Carnegie Mellon University
Behavioral Economics is a subfield of economics that, relying on insights from psychology and decisionmaking, aspires to describe actual behavior with greater empirical accuracy and psychological realism than that implied by the standard neoclassical model. In this course, we will investigate the success of this approach in explaining ostensible anomalies in the wild such as undersavings for retirement, overconsumption of unhealthy food, extreme aversion to losses among investors, workers, and homeowners, the overconfidence of corporate CEOs and NFL general managers, and the influence of emotions on domestic violence, stock market activity, and risktaking. We will first document and review the underlying theory for three conceptual departures from the standard model nonstandard preferences e.g., presentbias, reference dependence, nonstandard beliefs e.g., overconfidence, gamblers fallacy, and nonstandard decisionmaking e.g., heuristics, emotions, framing effectsand then quickly move to assess the evidence for these claims in field settings. We will additionally explore how markets respond to behavioral biases, and discuss recent research in behavioral policy with an emphasis on policies aimed at increasing savings, improving food choice, and heightening program takeup and compliance. The course will be papercentric and we will review a variety of popular empirical methods from field experiments to quasiexperimental approaches e.g., estimation through regressionbased panel analyses, differenceindifferences, and instrumental variables. Student evaluation will be based on performance on problem sets, an exam, as well as a short class presentation of an empirical paper of choice.
Prerequisites: none listed
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