Module Descriptor Title Behavioural Economics

Code ECM15

Level M

Credit rating 20M Level Credits

Pre-requisites Completion of first semester in any Master’s course at Brighton. Some knowledge of economics is preferable, as is a desire to understand developments in the theory and practice of behavioural economics.

Type of module Double.

Aims To provide a theoretical and practical knowledge of behavioural economics, using published academic theory, experiments, case studies, examples and applications.

To enable students to evaluate and apply relevant techniques from behavioural economics to improve decision making in their chosen career, whether public or private sector.

To illustrate the contrast between the fundamental assumptions of neo-classical economic models versus the evidence that people often behave in ways that contradict such assumptions.

To develop an awareness of the theories, processes, issues, methods and vocabulary of behavioural economics, and to enable students to see the links with other disciplines.

To give students the ability to improve the realism of their economic analysis, by incorporating features from behavioural economics such as an aversion for losses, a problem with self control, or a concern for others.

To critically analyse contemporary economic developments with a view to better understanding such phenomena as: the global financial crisis; environmental economics in general/climate change in particular; problems in public health; and similar “wicked” problems.

Learning outcomes/objectives

On completing the module, the student should be able to: Subject specific:

demonstrate a systematic and critical analysis of behavioural economics, from both a theoretical and an applied perspective

deploy the main models, core insights and key controversies from behavioural economics.

apply their knowledge of behavioural economics to help deliver client behaviours which are better aligned with their organisational objectives, whether in the public or private sector.

Cognitive:

use their knowledge of behavioural economics to deploy enhanced logical, critical and analytical skills.

employ behavioural economics as a tool to understand how people make decisions, and to aid their own decision-making.

understand the contexts in which problems are addressed, and select and apply appropriate techniques to solve problems.

Content The module covers core concepts and techniques associated with behavioural economics, as well as considering how these theoretical constructs are being applied in the public and private sectors. Content includes:

Overview; homo economicus or homo sapiens? Rational economics and irrational behaviour.

Judgement, heuristics and bias; bounded rationality; bounded self interest; bounded willpower; risk.

Now or later? Inter-temporal choice and hyperbolic discounts.

Too much information, too many choices: the curse of knowledge.

Boom, bust and bubbles: From the Joint Stock Company via the Wall Street Crash to the Credit Crunch; bulls & bears, greed & fear; irrational exuberance vs manic depression; herds and

heuristics: are markets efficient or emotional?

Altruism and fairness: reciprocity, punishment and just desserts.

Implications for the enterprise: sophistication, naivety and disciplined consumers; behavioural strategy.

Implications for public policy (public health, environment and climate change, transport): libertarian paternalism; nudges; framing; choice architecture; choice editing; defaults; heuristics.

Controversies: validity - lab rats and empirical actors; using data.

Teaching and learning strategies

The teaching and learning strategies for this module will require students to develop advanced knowledge and the critical application of theory to practice. This will be achieved via student’s independent research, guided by the class sessions and workshops. Students will be expected to actively participate in knowledge-sharing via participation in these sessions.

Lectures

Seminars Self Study 75

Workshops 30 Assessment 95

Total 200

Learning support Behavioural economics is a new field of study and there are few standard textbooks. Key texts for this course are:

Ariely, Dan “Predictably Irrational,” Harper Collins

Schwartz, Barry “The Paradox of Choice”

Thaler, Richard H and Sunstein, Cass R “Nudge: Improving Decisions About Health, Wealth, and Happiness,” Penguin

Other sources:

Akerlof, George & Shiller, Robert “Animal Spirits” Princeton University Press

Braffman, Ori & Rom, “Sway: The Irresistible Pull Of Irrational Behaviour,” Virgin Books

Camerer, Colin., Loewenstein, George., Rabin, Matthew. ”Advances in Behavioral Economics” Princeton (NJ), Princeton University Press

Diamond, Peter & Varitanen, Hannu, (Eds) “Behavioral Economics and Its Applications” Princeton University Press

Erwann Michel-Kerjan & Slovic, Paul (Eds) The Irrational Economist: Making Decisions In A Dangerous World

Harford, Tim, “The Logic of Life,” London, Little Brown

Ferguson, Niall, “The Ascent of Money”, London, Allen Lane, (and linked DVD)

Kahneman, Daniel & Tversky, Amos “Choices, Values and Frames,” CUP

Kindleberger, Charles, "Manias, Panics And Crashes" Loewenstein, George, (Ed) “Exotic Preferences: Behavioral Economics and Human Motivation,” Oxford University Press

Lunn, Pete, “Basic Instincts: Human Nature & the New Economics,” Marshall Cavendish

Pomykala, Jo, Behavioural Economics: A Crash Course (website) http://www.altruists.org/static/files/A%20Page%20on%20Behavioural%20Economics.htm

Sutherland, Stuart, “Irrationality,” London, Pinter & Martin

Ubell, Peter “Free Market Madness: Why Human Nature is at Odds With Economics, And Why It Matters” (Harvard Business Press)

Wilkinson, Nick, “An Introduction to Behavioural Economics,” Palgrave Macmillan

Journals

Numerous articles from economic journals (references to be provided)

Journal of Behavioural Decision Making http://www3.interscience.wiley.com/journal/117881858/issue

Journal of Economic Psychology http://www.sciencedirect.com.ezproxy.brighton.ac.uk/science/journal/01674870

Journal of Risk and Uncertainty

http://www.springer.com/economics/economic+theory/journal/11166

General

FT/broadsheet press

The Economist

Assessment tasks

1. An individual 3,000 word paper (100% weighting). 2. A reflective statement of 1,000 to 1,500 words (compulsory, but not weighted).

Brief description of module content and/or aims

Behavioural economics (BE) is an emerging subfield of economics that incorporates insights from psychology and other social sciences into economics. BE considers how the processes underlying decision-making influence our actual decisions – rather than, as with neo-classical economics, assuming away these processes to arrive at a flawed model of rational decision-making. BE, which uses empirical and laboratory evidence, is increasingly being used to inform practice in both the public and private sectors – it is now being applied to commercial, policy and behavioural challenges. This module sets out the key elements and gives students the opportunity to apply BE to decision making – both their own, and their clients.

Area examination board

Postgraduate Programme Examination Board, Brighton Business School

Module authors Stephen Young

Term offered Term 2/3

Delivery site Moulsecoomb

First approval 17/5/2010

Last revisions 31/3/11.

Date of approval of this version

17.5.10 (BBS School Board)

Version number 1.0

Replacement for previous module

N/A

Fields for which module is acceptable

Communications, Marketing, Public Health, Environmental Studies, Health and Social Sciences.

Course(s) for which module is appropriate

Optional for Masters courses at BBS, including MSc Commissioning for Health, MSc Management, Mgt Masters degrees from the Health Faculty and all other similar Master’s programmes, including Public Sector MBA.

School home Brighton Business School

Ext. examiner Prof Mike Brown