An essay on behavioral economics, and why everyone should study it.

1. Behavioural Economics
Kelly Kokaisel
Seven principles for policy-makers
Principle 1: Other people’s behavior matters
Principle 2: Habits are important
Principle 3: People are motivated to ‘do the right thing’
Principle 4: People’s self-expectations influence how they behave
Principle 5: People are loss-averse
Principle 6: People are bad at computation
Principle 7: People need to feel involved and effective to make a change
Why should everyone study economics?
Everyone should study economics. ‘Economics is part of everyone’s life’ [1]. There are numerous
reasons for this, and I have outlined a few below. Economics talk about how we interpret the world
around us. I believe that we, all of us on this planet including the Earth itself, are a system. We need to
operate sustainable in order for us to carry on into the future. For a system to operate sustainably,
information must be transparent to all. Everyone must understand the parameters, the options, and the
effects of their decisions on the whole. Economics is one element of these parameters. Social structure
and ecological structures need to be understood in conjunction with economics to account properly for
our actions.
Because people have power (to vote, to create, to destroy), and therefore they should be educated about
the context of the world in which their power matters. Politicians also have power, and they can use it on
uneducated people to get them to vote for something that benefits the elite rather than the people.
In an economy where people trade (work for money for goods and services), one needs to understand
how to value things, and how others value things in order for these trades to be meaningful.
Understanding how these economics on a social scale affect us helps us to then look towards ourselves
and understand how our individual life is giving to and taking from our economy, and how we might
improve our decision making skills. If we as individuals make educated decisions that put us into a good
job (socially, economically, and environmentally), and we create better goods and services, and invest
our resources more wisely, then as a whole those benefits will be compounded and create much more
good for all, collectively.
Understanding economics may lead an educated person to recognize missing pieces or holes in the
traditional economics teachings, creating opportunities to correct for things not accounted for, much like
what carbon offsets do by recognizing that there is an unseen cost in consuming non-renewable
resources that must be accounted for to be sustainable in the long run.
This understanding of what economics accounts for, and does not account for, will provide us the tools
we need to make good decisions that will protect what we really value for a long time coming. ‘Really,
economics is about what we desire and what we’re willing to give up to get it’ [2]. I think if we recognize
what we desire, and what makes us truly happy, we will see that our culture has gone off track. We have
been taught to desire things that make only a few happy (the elite), but if we are brought up to understand
what makes us truly happy, it is then that we will benefit ourselves more, and the human race as a whole.

2. [1] http://answers.yahoo.com/question/index?qid=20080109073101AAwEpn4
[2] Herman E. Daly, Joshua C. Farley, Ecological economics: principles and applications, pg. 3.