Economists and their models often refer to an imaginary being called Homo Economicus, who always makes rational economic decisions to improve his or her lot in life.
Behavioural Economics is a discipline that questions this idea, bringing insights from the fields of psychology, sociology and neuroscience to the world of economics.
The field’s most famous researchers, Daniel Kahneman and Amos Tversky demonstrated in the late 70s that human beings aren’t as rational as they would like to think.
Particularly when looking at their attitudes and responses to gains and losses, they often behave in ways that a purely rational being only wouldn’t.
Their research has shown that even people who should know better (scientists, economists, statisticians) have certain cognitive biases in place that lead them to behave in a less than the rational way in certain situations.