It might be new to some but here is a bold statement…humans don´t make rational decisions.

In traditional economics a person is expected to weight the benefits and drawbacks of an action and choose the option in their own self-interest. We have all been educated to think this is true in business as well as in life but everyone that have observed real life behavior of people know that this is not right.

In the high-speed society that we live in today real-world choices are very often irrational, taken out of context and sometimes made against our own interest.

During the last 15 years behavioral economics have been used by companies to influence and take advantage of this fact.

In the following I have made a list of 8 takeaways from behavioral economics that are used to influence our decision making in business and life:

1. Social proof / People look to other people for information about what to buy
2. Loss aversion / People are more willing to take risk avoid losing things than gaining things
3. Endowment effect / People value items they own more than a similar item owned by someone else
4. Default / People value when someone help them with pre-set options or courses of action
5. Choice overload / People get overwhelmed when presented with too many options
6. Framing / People’s decisions are influenced by how the context is presented
7. Decoy effect / People’s preferences can change when a third, but less desirable option, is presented
8. Anchoring / People rely on the first piece of information offered and use it as a benchmark

While not all these nudges or manipulations are used to make people take negative behavioral decisions such as eating unhealthy food, surfing our phones, or buying yet another piece of cloth we need to understand the real power of behavioral economics and how this insight in human decision making can be used to make more positive behavioral decisions in our lives.

Let´s use these takeaways from behavioral economics to help more people take positive behavioral decisions for themselves and their closest in their lives.