How does behavioral economics differ from traditional economics?

Behavioral economics differs from traditional economics in that it incorporates psychological and sociological factors into its analysis of economic behaviors. Traditional economics is based on the assumption that individuals are rational and always act in their self-interest, while behavioral economics recognizes that humans are inherently irrational and often make decisions based on emotions, biases, and social influences.

Traditional economics typically relies on mathematical models and idealized assumptions, while behavioral economics uses empirical research and experiments to study actual human behavior. By understanding how individuals make economic decisions in real-world situations, behavioral economics can provide more accurate and realistic predictions of market behavior and consumer choices.

In summary, while traditional economics focuses on rationality and efficiency, behavioral economics takes into account the complexities of human behavior and the various factors that can influence decision-making processes.