When you combine economic theory with complex insights into human nature and behavior (personality and social psychology to be more precise), you get behavioral economics. The discipline is a relatively new one with its beginnings dating back only around 50 years ago.
Its foundations can be discovered in the work of Daniel Kahneman and Amos Tversky conducted during the 1960s at the Hebrew University of Jerusalem, Israel, and continued later at Stanford University, California. Their research was focused on heuristics and decision-making under uncertainty, and they challenged the dominant paradigm in economics at the time called “rational choice theory”. Ever since, the way economists view the world has been changed by the people who keep challenging and disrupting the rational-choice viewpoint and approach.
This roster represents some of the top behavioral economists in the world and touches on the scope of their work. (The list has been compiled in no particular order.)
1. Dan Ariely
Dan Ariely managed to bring his understanding of the economic and psychological aspects of human behavior closer to a broader audience. His work and books discuss the foundations of behavioral economics with grounds in:
- principles of human cognition and behavior,
- the need to redefine individual motivation through these “new” principles,
- how these principles affect the interaction between people in reference to honesty and dishonesty, and
- the impact these principles have on the finance-related decision-making process of individuals and companies.
Also, he is a founder or co-founder of many start-ups and management consulting firms and applies the behavioral economics insights to business strategy, operations, marketing, and creating public policy.
2. Iris Bohnet
Applying the principles of behavioral economics, Iris Bohnet analyses and finds solutions for challenges in society and business management environments in areas such as decision-making, bargaining, developing trust, and gender equality. In her famous book on behavioral science and discrimination, she offers evidence-based solutions to overcome gender bias in classrooms and boardrooms, in hiring and promotion, benefiting businesses, governments, and society. Bohnet’s has great international experience and has worked in the US, Switzerland, Brazil, China, Turkey, Oman, and other Arab countries in the Middle East.
3. Tim Harford
Tim Harford’s accomplishments have mostly been focused on making behavioral economics more accessible to a wider audience. Being a very productive author, columnist, writer, and broadcaster, he has managed to help people understand the principles of behavioral economics and improve their economic outcomes and lives by giving exceptionally clear explanations and everyday examples of how these “mechanisms” function.
4. Djuradj Caranovic
Djuradj Caranovic’s work focuses on making changes on a company level with achieving maximal operational productivity as its main goal. Djuradj Caranovic employes his insights into behavioral economics to identify the company’s, employees’, and consumers’ needs and then uses existing resources and introduces small-step strategic changes to encourage development. Also, innovations in areas ranging from digital transformations to AI and voice-based technology have been in the center of Djuradj Caranovic’s prolific career.
5. Uri Gneezy
Uri Gneezy has shed light on a number of issues such as:
- incentives and the conditions under which they work or not,
- competitiveness and the impact of deception on it,
- the impact of gender differences on competitiveness and other economic behavior, and
- behavioral pricing.
He is particularly known for creating experiments that show the basic principles of the way psychology impacts economic behavior. Also, he has been successful in the entrepreneurial arena with his business consulting firm that utilizes behavioral economic insights in business.
6. Kathleen Vohs
Kathleen Vohs is known for her achievements in behavioral finance and behavioral economics and significant contributions to the field of consumer psychology. Her works on the effects choices have on our behavior, the psychology of money, the economic principles of heterosexual sexual relations, and behavioral patterns such as impulsive spending, are only a part of what she has achieved in the field.
7. Sendhil Mullainathan
Sendhil Mullainathan directed his attention on topics such as racial discrimination, government and corporate corruption, corporate governance, labor markets, and energy policy from a behavioral economics standpoint. Also, Mullainathan has studied the interrelationship between poverty and psychological factors. He has shown that stresses related to financial insecurity affect cognitive function and that by giving workers more control over their work increases productivity and satisfaction. In 2017, he produced an in-depth analysis of strengths and dangers of incorporating machine learning technology into behavioral economics.
8. Nava Ashraf
Nava Ashraf applies her insights into behavioral economics to problems in international development in countries in the developing world (Kenya, Zambia, South Africa, the Philippines, and El Salvador) and family problems. Main topics that can be found in her research are:
- how gender plays a role in savings in traditional societies,
- how the contribution of spouses to the household income is correlated and dependent upon which spouse controls the saving and spending,
- how savings can be improved by offering interest rates on the basis of hyperbolic discounting, and others.
9. George Loewenstein
Intertemporal choice theory is the main focus of George Loewenstein’s research. The theory has very wide and practical application and it affects our decision-making process, or what we are prepared to do or not in different areas of our lives with respect to economic behavior:
- the amount of money and time we decide to allocate to our savings and education,
- health-related decisions we make such as nutrition, exercise
Another part of the decision-making process that Loewenstein emphasizes in his work is the person’s emotional state and how it affects their choices.
10. George Akerlof
George Akerlof’s early work revolved around proving that one specific difficulty for the mainstream economic theory called information symmetry (which assumes that both parties to a transaction share the same information) should be abandoned and proposed a more realistic approach. He showed that a better economic insight can be gained through an asymmetric information principle which, to put it simply, shows that the huge disparity in information between sellers and buyers creates an adverse selection of products and services. Akerlof shared the 2001 Nobel Memorial Prize for Economic Sciences for his groundbreaking findings.