EC200: Introduction to Behavioural Economics

How do people really make choices when faced with uncertainty? Do people know what makes them happy? How do people make predictions about the world around them? These are some of the important questions behavioural economists seek to answer.

Combining the fields of psychology and economics, the discipline challenges traditional economic theory which assumes that individuals make rational choices. Rather, behavioural economics considers how people are more social and impulsive, less adept at using information, and more susceptible to psychological biases than standard economic models assume.

This highly interactive course gives students a clear introduction to the principles and methods of behavioural economics in relation to individuals, firms and institutions. Addressing behavioural economics both at the macroeconomic and microeconomic levels, you will engage in important topics such as heuristics, biases, nudging strategies and rational expectations.

Providing you with cutting-edge analytical tools, drawn from recent research, you will understand how to apply these tools in a variety of economic settings both in the private and public sectors. Using these tools you will be able to incorporate psychologically-motivated assumptions into economic models, and interpret the implications of these assumptions for policy development and business strategy.

Prerequisites: Introductory microeconomics (to the equivalent of EC101)

Level: 200 level. Read more information on levels in our FAQs

Fees: Please see Fees and payments

Lectures: 36 hours

Classes: 18 hours

Assessment: Two written examinations

Typical credit: 3-4 credits (US) 7.5 ECTS points (EU)

Please note: Assessment is optional but may be required for credit by your home institution. Your home institution will be able to advise how you can meet their credit requirements. For more information on exams and credit, read Teaching and assessment

This course is suitable if you do not have a background in behavioural economics but would like an understanding of how the field can be used to inform business strategy and policy decisions. It is ideal if you are pursuing a career in consulting, policy development, marketing or in government. It is equally applicable to developing the skills needed for further academic study.

• Identify and evaluate evidence for systematic departures of economic behaviour from the predictions of the neoclassical model, and psychological explanations for these anomalies
• Incorporate psychologically-motivated assumptions into economic models, and interpret the implications of these assumptions
• Explain how these models change the predictions for equilibrium behaviour and welfare analysis, and assess the implications for optimal policy
• Compare the predictions of neoclassical and behavioural models, and evaluate the best method for approaching a given topic

The design of this course is guided by LSE faculty, as well as industry experts, who will share their experience and in-depth knowledge with you throughout the course.