There is a close link between psychology and economics that determines how individuals behave towards their economic decisions. Behavioural economics is a branch of knowledge that combines aspects of economics, psychology and neurosciences.
According to it, financial decisions are not the result of rational behaviour but rather the product of irrational motives on the part of consumers and investors.
According to experts, economic phenomena result from various psychological, social and cognitive factors influencing our decision-making and, in turn, the economy.
Applications and concepts of behavioural economics can be used in making public policies or guiding the behaviour of individuals towards more and better decisions for public and private goals.
That includes stimulating or strengthening the economic sectors or the private sector in establishing fruitful national projects, promoting innovation and development, food security projects, behavioural stimulation in the context of energy consumption, increasing the rate of saving and investment, stimulation towards environmental issues, stimulation towards achieving development goals and influencing individuals with a better and healthier lifestyle.
Oman has realised the importance of this concept when in 2020 it established a department specialised in behavioural economics affiliated with the Ministry of Economy as one of the outputs of Oman Vision 2040.
The unit mainly aims to improve the effectiveness of public policies through behavioural studies, in addition to facilitating and activating public services for citizens through re-engineering various alternatives to consumers, in addition to cooperating with the private sector in redesigning alternatives in order to achieve the public interest.
Explains Rashid al Shethani, an economics researcher, “when some people who suffer from obesity or are overweight plan to reduce their weight by eating healthy meals, their plans fail as soon as some celebrities on social media promote large discounts for a restaurant. The weight reduction project fails because people are affected emotionally and socially by those cuts and discounts”.
He added that for a broader understanding of behavioural economics, look to the arrangement of beverages on shops’ shelves. “Promoting the applications of this type of economy requires placing healthy drinks on the front shelf to be more prominent or in a place that makes it easier for the consumer to choose the healthy drink over the unhealthy one, which should be put at a less prominent place. This process is called “nudge”, as it directs people towards healthy options”.
Al Shethani confirms that what distinguishes behavioural economics from traditional economics is that the first cares about people emotionally and rationally, where a change can be made in their choices by motivating them to make decisions through specialised applications designed for that, taking into account human nature and its vulnerability to variables. While logic prevails when making decisions in the traditional economy.
“Thus, it is good to integrate the classical theories of economics with the principles and applications of behavioural economics to protect people from poor decision-making resulting from irrational and emotional behaviours”.
Directing social media celebrities, or so-called influencers, in addition to active and influential news accounts, towards promoting behavioural economics applications is very important, according to Al Shethani.
These methods are one of the modern methods favoured by the current generation to discuss its aspirations and challenges, as both celebrities and news accounts are one of the means that help direct public opinion and define its starting points.
Oman Observer is now on the WhatsApp channel. Click here
