ABSTRACT
The term behavioural conjures up a departure from the mechanistic deductive model of standard economics that evokes an image of a radically human-centred approach to understanding economic phenomena. Jolls et al argues that behavioural economics may be deemed as superior to neoclassical economics because, it uses empirically validated descriptions of actual behaviour while retaining most of the supposed 'parsimony' and predictive tightness of the Homo Economicus template. People have been observed to use a number of techniques for making choices that are not consistent with the straight benefit-cost analysis of Homo Economicus. The first surrounds the nature of optimisation and the second surrounds the mechanics of bounded rationality that is how it actually operates, how constraining it actually is and whether some areas of decision-making are more prone to it than others. Finally, the chapter reviews some potential 'fixes' to behavioural effects.
