Behavioural economics perspectives: Implications for policy and financial literacy

Abstract

This paper summarizes and highlights different approaches to behavioural economics. It includes a discussion of the differences between the “old” behavioural economics school, led by scholars like Herbert Simon, and the “new” behavioural economics, which builds on the work of Daniel Kahneman and Amos Tversky and is best exemplified by Richard Thaler and Cass Sunstein’s recent book, Nudge. These important currents in behavioural economics are also contrasted with the conventional economic wisdom. The focus of this comparative analysis is to examine the implications of these different approaches in behavioural economics for financial literacy.