It’s a merging of two worlds.

Traditionally, economics uses sophisticated mathematical and econometric methods, but relies on relatively simplistic assumptions about human nature. Meanwhile, by contrast, research in neighboring social sciences generally uses less sophisticated analytical methods while entertaining a richer description of man.

Behavioral economics (BE) combines the strengths of both. Here, we incorporate psychological insights into economic analysis, typically with continued use of sophisticated analytical tools.

BE has recently become the fastest growing field in economics—and one of the most exciting. It examines a wealth of evidence, often experimental, identifying empirical phenomena that are not adequately explained by traditional economic analysis. BE develops new models that incorporate emotions, fairness, reciprocity, social norms, bounded rationality and myopia, among others. The research often builds on game theory, which provides more flexible tools for this purpose than classical price theory or general equilibrium theory. BE is developed hand-in-hand by theorists and experimentalists, with many scholars having a foot in each camp.

BE is a portrait of the power in interdisciplinary work. Economists are informed by researchers in other fields, such as psychology, sociology, philosophy and the neurosciences. In return, BE offers analytical tools, models and modes of thinking that can enhance the research of scholars outside economics.