What Is Behavioral Economics? The Secret Science of Your Choices

Do you remember the last time you walked into a convenience store with your allowance burning a hole in your pocket, staring at the open freezer full of ice cream? Maybe you had two flavors you loved: rich chocolate with a crunchy chocolate coating, and bright strawberry with popping candy sprinkles. You knew you wanted chocolate, but then you saw the third option: vanilla ice cream with a tiny plastic T-Rex toy stuck in the top. You picked the vanilla. You don’t even like vanilla that much. But you got the T-Rex. If your mom or dad asked you why you picked that one, you might have said, “Because I wanted the toy!” or “It just looked way more fun!” If you asked a regular economics expert, they might shake their head and say, “That’s not a rational choice! You should have picked the chocolate, which you like the most, to get the most happiness for your money.” But a behavioral economist would smile and say, “That’s a totally normal choice! Your brain just used a quick shortcut to pick the option that seemed most fun in the moment — and that’s exactly what we study.”

[Illustration 1.1 (Print Book: Full page, opposite the chapter opening; Digital Edition: Hover to enlarge): A 7-year-old kid with messy brown hair and a backpack covered in dinosaur stickers stands on tiptoe in front of a lit convenience store freezer, eyes wide. Three ice cream bars float above the open freezer door: one wrapped in dark chocolate with a bite taken out of it, one covered in pink sprinkles with a “POP!” sound effect next to it, and one with a bright green plastic T-Rex peeking out of the vanilla top. A tiny thought bubble above the kid’s head shows a cartoon brain drawing a fast, squiggly arrow straight to the T-Rex ice cream, labeled “QUICK CHOICE MODE: ACTIVATED!” The store clerk in the background smiles and holds a waffle cone, waiting. Caption for print: “Your brain uses shortcuts to make choices fast — even when you’re picking ice cream!”]

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Wait, What Even Is Economics, Anyway?

Before we talk about behavioral economics, let’s start with the “regular” kind, the stuff you might have heard grown-ups talk about at the dinner table. Regular economics is the study of money, prices, buying and selling things, and how countries and businesses make choices about stuff like how much to charge for toys, or how many apples to grow. For a long time, regular economics made a big assumption about *you*: it assumed that every time you make a choice, you are 100% rational. That means you always make a list of all the good and bad things about each option, add up all the numbers, and pick the one that gives you the most happiness for the least money. For example, regular economics would say that if you have 5 dollars to spend at the store, and you love chocolate ice cream more than strawberry, you will *always* pick the chocolate, no matter what. It would say that if you see a toy that costs 10 dollars, and you only have 5 dollars, you will *never* try to convince your mom to buy it for you. It assumes you never make choices that don’t make “logical” sense.

[Sidebar (Digital Edition: Collapsible; Print Book: Light gray box, p.3): What’s “rational” anyway? “Rational” just means making choices based on facts and numbers, not feelings. Regular economics thinks you never let feelings get in the way of your choices — but we all know that’s not true!]

But if you’ve ever picked a snack just because it had your favorite cartoon character on the box, even if your mom said it tasted like cardboard… or stayed up until midnight playing your favorite video game even if you had a big math test the next day… you already know that regular economics gets it wrong sometimes. People don’t always make choices based on facts and numbers. We make choices based on our feelings, our habits, what our friends are doing, and even what’s right in front of our faces. That’s where behavioral economics comes in.

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Behavioral Economics: The Science of Real Choices

Behavioral economics is a mix of two subjects: economics (the study of money and choices) and psychology (the study of how our brains work). While regular economics only looks at the money part of choices, behavioral economics looks at the *whole* picture: your brain, your feelings, the room you’re in, the people you’re with, and even the time of day. The most important thing behavioral economics tells us is: all people make “silly” or “irrational” choices sometimes — and that’s totally normal. It’s not because you’re not smart, or you’re bad at making choices. It’s because your brain has little shortcuts that help you make choices fast, without having to think about every single detail. Let’s test this. Imagine you’re at recess, and you have to pick between two games to play: four square, which you’re really good at and you know you’ll win, or tag, which you love but you always get out first. What do you pick? If you pick tag, regular economics would say you made a bad choice — you should pick the game you’ll win at, right? But behavioral economics says you picked tag because it’s more fun, and your brain used a shortcut to pick the option that would make you happier in the moment, even if you don’t win. That’s not a bad choice — that’s a human choice! Scientists have studied this for decades. One of the first famous behavioral economists was a man named Daniel Kahneman, who won a Nobel Prize for his work. He found that even grown-ups who are supposed to be super smart at making choices (like doctors, bankers, and CEOs) make these “silly” choices all the time. For example, he did an experiment where he asked doctors if they would choose a surgery that had a 10% chance of dying, or a surgery that had a 90% chance of surviving. Most doctors picked the 90% survival option — even though both surgeries are exactly the same! The only difference is how the choice is worded. That’s a brain shortcut at work.

[Sidebar (Digital Edition: Link to 2-minute video of Daniel Kahneman explaining his experiment to kids; Print Book: QR code linking to the video, p.4): Want to hear Daniel Kahneman explain his doctor experiment himself? Scan this code to watch a short video made just for kids!]

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Your Brain’s Super Fast Shortcuts (That Sometimes Trick You)

Your brain is like a super fast computer. It makes thousands of choices every day: what to eat for breakfast, what shirt to wear, which way to walk to school, what game to play at recess. If you had to stop and think about every single one of those choices for 10 minutes, you’d never get out of the house in the morning! So your brain made little shortcuts to help you choose fast. Scientists call these shortcuts *cognitive biases*. That’s a fancy name, but all it means is: a quick, automatic choice your brain makes without you even noticing it. Cognitive biases are not bad! Most of the time, they help you. For example, if you always eat oatmeal for breakfast, your brain uses a shortcut to make you choose oatmeal without you having to think about it every morning. That saves you time, and you don’t have to stress about what to eat. But sometimes these shortcuts trick you into making choices you don’t really want. Let’s talk about two of the most common biases that affect kids (and grown-ups!) every day.

1. Anchoring Bias: The First Thing You See Tricks Your Brain

The first shortcut is called *anchoring bias*. That’s a fancy name for a super simple idea: the first piece of information you see (the “anchor”) changes all the choices you make after that. Let’s try an example. Imagine your mom says you can have one treat at the grocery store, and she gives you a 5 dollar limit. You walk into the store, and the first thing you see is a giant 50 dollar limited-edition chocolate bunny shaped like a dragon. You stare at it for 10 minutes, wishing you could have it. Then you walk a little further, and you see a regular chocolate bar for 5 dollars. You immediately think, “Wow! That’s suc