It all started when…
Behavioral economics develops and applies models of systematic human errors of cognitive reasoning; the human mind has cognitive limitations regarding decision making, and behavioral economics identifies and oftentimes applies tools to correct for these imperfections. In other words, behavioral economics uses information about human decision error and develops tools to guide consumers towards better decisions. Unlike traditional economic systems, behavioral economics does not rely on consumers to make perfect decisions dependent on market conditions. Instead, in any moment, a consumer makes decisions based on their psychological state, and this is known as status quo bias.
Inherently, the status quo bias is conditional decision-making and is flawed. The status quo bias plagues decision makers, especially if the decision to be made includes the perception of losses incurred as a result of a decision. The growth and application of behavioral economics and behavioral modification is beset with the obligation to collaborate, synthesize, and incorporate what was previously thought to be disparate ideas.
Conceptually, behavioral economics articulates the idea that patients (and providers) can be persuaded to make better decisions by a simple change in the environment and choices presented to them. In 2008, this ground-breaking theory was presented in the book Nudge by Nobel Prize winner Richard Thaler and his contemporary, Cass Sunstein. Simply put, patients and providers don’t act in purely rational and predictable ways, but their choice making doesn’t always benefit their health, finances, or even those around them.