Behavioural economics is pertinent to us all in business when either making our own choices, or helping others to do so.
The key points in this article relate directly to our research into leadership and neuroscience. Executives are paid to take responsibility for making decisions. Here's the key takeaways:
- We will always be conflicted between what we want and what's good for us. Steve Peters calls this the fight between the chimp and the human.
- Any weakness which we're not aware of will be exploited. The foundation of any development is self-awareness.
- Short -term thinking is pervasive, and not enough attention is paid to 'outlier events' and events which are out of sight, unpleasant or longer term.
In 1987, two professors at UC Berkeley, Daniel Kahneman, a psychologist, and George Akerlof, an economist, offered a joint class called Psychology and Economics for the first time. They each went on to win the Nobel Prize for Economics in consecutive years in 2001 and 2002. Their groundbreaking work applying psychological insights into economic theory help us to understand why people make irrational choices.