'''Behavioral economics''' is the field of [[economics]] that is concerned with the [[psychological]] underpinnings of individuals' economic decisions.<ref>Camerer, Colin and Loewenstein, George. "Behavioral Economics: Past, Present, Future." October 25, 2002. http://www.hss.caltech.edu/~camerer/ribe239.pdf</ref> This is not limited to purely financial transactions, and can include the study of everyday social interactions. Behavioral economics can be thought of as a combination of [[microeconomics]], [[psychology]], and [[sociology]]. Behavioral economics can often explain how a seemingly unexpected decision or unexpected economic oucome actually makes sense.
A key insight from behavioral economics is that people do not behave rationally all the time. That is to say, people do not always make decisions that maximize their [[utility]] based on the best information available. This is significant because a key assumption of many economic models is that all economic actors act rationally. The concept of "bounded rationality" is that one's ability to make good decisions is limited by available information, mental capability, and the time available to decide.<ref>Gigerenzer, Gerd and Selten, Reinhard. ''Bounded Rationality: The Adaptive Toolbox''. August 7, 2002. MIT Press. httphttps://books.google.com/books?id=dVMq5UoYS3YC</ref> This can have implications for the effectiveness of [[democracy]].
==Examples==