Economic Psychology: Selected Topics
Economic decisions are ubiquitous and interwoven into many of our everyday experiences and especially in the context of work. We can define an economic decision as any decision related to the expenditure and saving of time, money and effort. For example, behaviors like negotiation, choice behavior, work effort, or knowledge sharing. All these behaviors occur in a social context.
In traditional economics it is assumed that people's actions are fuelled only by self interest, that they make rational decisions which maximize their utility, and that context is hardly relevant. This economic thinking has affected organizational theory and research for decades. Newer research in behavioral economics and finance, and economic and neuropsychology paint a very different picture. The social nature of human beings, the hardwiring of the brain, and the critical importance of context makes the assumptions of many microeconomic models incorrect and/or incomplete. People are not "homo economicus", they can operate with both self and other-interest simultaneously; people are human and fundamentally social and connected to one another.
Economic predictions fail to explain why we give money to a charity, value fairness over outcomes, walk away from a profitable deal, or why we help a co-worker. Economic psychology aims to describe, predict and explain the actual economic behavior of individuals, and groups.
In this course we focus on selected topics within the field of Economic psychology. We examine the psychological evidence that demonstrates the social and connected nature of work relations, and apply this specifically to interdependent decision situations- negotiations, groups, and social relationships at work. Throughout the course we demonstrate the applicability of psychological research for understanding and predicting some economic behaviors. We take the students through theory, empirical evidence and their own experiences and assumptions.
We begin the course with an overview and trends within economic psychology, and then we examine problems with the core assumption of self interest in the standard economic model. The third section of the course focuses on the work context examining interdependent decisions situations (e.g. negotiation).
- Introduction and overview of economic psychology
- Selected examples of anomalies in our economic thinking
- The fallacy of self interest only: social connectedness
- Interdependent decision making
- Summary and applications
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