Hocbigg - Behavioral Economics

Introduction

Standard neoclassical economics models human behavior around Homo economicus—an idealized agent with stable preferences, perfect self-control, and unlimited cognitive bandwidth who consistently maximizes expected utility. Behavioral economics modifies and enriches this benchmark by incorporating empirical findings from psychology. It systematically examines how real people actually make choices: how cognitive shortcuts produce predictable errors, why context and framing distort decisions, how immediate impulses override long-term plans, and how fairness and social norms influence economic outcomes.

Scope and Prerequisites

This curriculum covers the essential theoretical and empirical foundations of undergraduate-level behavioral economics. It assumes no formal background in economics, psychology, or advanced mathematics. A working comfort with basic high school algebra, basic probability concepts (such as expected value), and reading standard Cartesian graphs is sufficient to follow all core arguments and formal models.

The curriculum is intentionally lean: it focuses strictly on the core conceptual tools and empirical milestones that every learner in the discipline needs. It does not attempt to cover advanced econometrics, laboratory coding, or specialized subfields. Once you complete this foundational core, you can explore specialized fields in Advanced Topics (such as behavioral finance, behavioral game theory, and organizational design), apply these frameworks to concrete deliverables in Projects (such as sludge audits and decision mapping).

How to Navigate This Curriculum

The curriculum is organized into four sequential subjects that build directly upon one another:

Principles of Microeconomics establishes the rational-choice benchmark. You must understand standard consumer theory, utility maximization, and market equilibrium before you can understand what behavioral economics critiques, refines, and extends.
Cognitive Psychology and Judgment introduces the psychological mechanics of decision-making. Here, you study the dual-process model of cognition, heuristics, and systematic biases. This module can be studied alongside microeconomics, but it must precede formal behavioral modeling.
Behavioral Economics: Core Theory integrates the first two subjects. With the neoclassical model and cognitive psychology in hand, you study the formal mathematical alternatives to standard theory: prospect theory, reference dependence, present bias, and social preferences.
Applied Behavioral Economics and Choice Architecture examines how behavioral theory is put into practice. This final core stage covers the design of choice environments, defaults, policy nudges, and administrative friction ("sludge") in public and private institutions.

Curriculum

Principles of Microeconomics

The standard neoclassical framework of rational choice, utility maximization, consumer preferences, supply and demand, and market equilibrium against which behavioral economics is situated.

Khan Academy Microeconomics (Khan Academy) - An optional, gentle introductory primer covering foundational microeconomic concepts through short videos and practice drills, ideal for absolute beginners before tackling formal university-level materials.

14.01SC Principles of Microeconomics (MIT OpenCourseWare) - A comprehensive undergraduate video lecture course taught by Jonathan Gruber, offering full lecture recordings, problem sets, and exams; choose this as your primary foundational track if you learn best through structured university lectures.

The Economy 2.0: Microeconomics (CORE Econ) - A free, open-access, browser-native textbook that serves as a modern reading alternative to Gruber's lectures, introducing institutional context, empirical data, and bounded rationality directly alongside standard neoclassical models.

Cognitive Psychology and Judgment

The psychological foundations of judgment and decision-making, emphasizing dual-process cognition, heuristics, systematic biases, framing, and cognitive illusions.

PSYC 110: Introduction to Psychology (Open Yale Courses / Paul Bloom) - An optional introductory lecture series; prioritize lectures 8 through 16 (focusing on cognition, conscious decision-making, and social psychology) to build psychological literacy before exploring formal economic models.

Thinking, Fast and Slow (Daniel Kahneman) - The canonical, non-technical synthesis of the heuristics and biases research program, detailing System 1 and System 2 thinking, overconfidence, and loss aversion; study this alongside the lectures as your central conceptual text.

Judgment under Uncertainty: Heuristics and Biases (Amos Tversky & Daniel Kahneman, Science, 1974) - The seminal primary paper establishing the representativeness, availability, and anchoring heuristics; read this concise text after Kahneman's book to examine the original experimental evidence at its source.

Behavioral Economics: Core Theory

The formal study of non-standard human choice: prospect theory, reference-dependent preferences, present-biased time preferences, bounded rationality, and other-regarding social preferences.

14.13 Psychology and Economics (MIT OpenCourseWare) - A complete undergraduate course by Frank Schilbach with recorded lectures, slides, and problem sets, providing the central structured lecture path for the mathematical and empirical core of behavioral economics.

A Course in Behavioral Economics (Erik Angner) - The premier introductory undergraduate textbook for independent study, presenting choice under certainty, prospect theory, hyperbolic discounting, and behavioral game theory with clear math, everyday examples, and end-of-chapter exercises; use this to ground the MIT lectures.

Misbehaving: The Making of Behavioral Economics (Richard H. Thaler) - An engaging narrative history and conceptual memoir by a Nobel laureate founder of the discipline; read this alongside Angner's textbook to understand how behavioral anomalies challenged standard economic doctrine.

Prospect Theory: An Analysis of Decision under Risk (Daniel Kahneman & Amos Tversky, Econometrica, 1979) - The foundational paper of behavioral decision theory, freely accessible as an open PDF; read this after completing the risk-preference modules in Angner or MIT 14.13 to see the formal mathematical modeling of the S-shaped value function and probability weighting.

Applied Behavioral Economics and Choice Architecture

The translation of behavioral insights into real-world applications, focusing on choice environments, default settings, policy nudges, administrative sludge, and intervention ethics.

Nudge: The Final Edition (Richard H. Thaler & Cass R. Sunstein) - The seminal, fully revised and updated text defining choice architecture, defaults, and libertarian paternalism, incorporating real-world policy insights from international nudge units and the psychology of "sludge."

World Development Report 2015: Mind, Society, and Behavior (World Bank Group) - A free, comprehensive, open-access institutional volume showing how behavioral insights, social norms, and mental models are applied to public policy, health, poverty alleviation, and household finance; read this alongside Nudge as an applied field guide.

Behavioral Economics: Past, Present, and Future (Richard H. Thaler, American Economic Review, 2016) - A concise, open-access presidential address and review article summarizing the evolution of behavioral economics and its applied implications for modern public policy in roughly twenty pages.