Behavioral economics blends psychology and economics to explain why people often act irrationally. Standard economic theory assumes rational actors who weigh costs and benefits. Real people procrastinate, overspend, and follow the crowd. Behavioral economists study those gaps.

Key concepts include loss aversion (losses hurt more than gains feel good), anchoring (the first number we see skews our estimate), and present bias (we prefer immediate rewards over delayed ones). These aren't quirks. They are predictable patterns that shape markets, public policy, and personal finance.

Nudge theory applies these insights. A cafeteria that places fruit at eye level and candy on a high shelf nudges healthier choices without banning anything. Automatic enrollment in retirement plans boosts savings rates. Critics worry about manipulation, but the evidence shows small design changes can have large effects.

Core ideas

• Loss aversion
• Anchoring and framing
• Present bias and procrastination
• Social proof and herd behavior
• Nudges and choice architecture