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How humans behave: implications for economics and economic policy

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  • Richard W. Kopcke
  • Jane Sneddon Little
  • Geoffrey M.B. Tootell

Abstract

Economic policymakers attempt to improve the welfare of their citizens, based on assumptions about how people think, feel, and behave, and on what they view as welfare-improving. Economists usually describe economic agents as fully informed and model them as striving to maximize a set of stable preferences. While these assumptions provide a simple framework for analyzing economic activity, actual human behavior has proved more complex. As a result, economists have started looking to psychologists and others who study human behavior for guidance on the decision-making process, the roles of motivation and emotion, and the determinants and measurement of happiness. ; The 48th economic conference sponsored by the Federal Reserve Bank of Boston brought together economists, behavioral scientists, and economic policymakers with the hope of applying insights from psychology and other behavioral disciplines to improve understanding of how people make decisions as individuals and, ultimately, in a macroeconomic setting. The goal of the conference was to help economists and policymakers discover new ways of improving their models, their forecasts, and their economic policy decisions. This article summarizes the conference proceedings.

Suggested Citation

  • Richard W. Kopcke & Jane Sneddon Little & Geoffrey M.B. Tootell, 2004. "How humans behave: implications for economics and economic policy," New England Economic Review, Federal Reserve Bank of Boston, pages 3-35.
  • Handle: RePEc:fip:fedbne:y:2004:p:3-35
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    References listed on IDEAS

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    Cited by:

    1. Bovi, Maurizio, 2009. "Economic versus psychological forecasting. Evidence from consumer confidence surveys," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 563-574, August.
    2. Ashton, John K. & Hudson, Robert S., 2008. "Interest rate clustering in UK financial services markets," Journal of Banking & Finance, Elsevier, vol. 32(7), pages 1393-1403, July.
    3. Nathan Berg & Gerd Gigerenzer, 2007. "Psychology Implies Paternalism? Bounded Rationality may Reduce the Rationale to Regulate Risk-Taking," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 28(2), pages 337-359, February.

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    Keywords

    Macroeconomics ; Economics ; Economic policy;

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