As of August 2021, the time when I am writing this, SARS-CoV-2 is wreaking havoc throughout the world and there are no signs of it abating. Words such as “self-restraint” and “nesting” are replete throughout the news, with a dampening effect on the economic activities of us consumers. Particularly in Japan, the Tokyo Olympics, which would ordinarily have been expected to produce huge economic benefits, were postponed. With the relentless stream of dark news, it is as if the entire world is blanketed in a strange atmosphere.
Shifting to a more micro-level perspective, there are many people who are facing difficult circumstances and life changing events. These include those business people who have had their incomes drop because of declines in corporate profits, and also those working for small and medium enterprises whose sales have gone to zero and whose businesses are in the red every month due to municipal ordinances for them to temporarily shut their doors. In such times, when the amount of money you have on hand is low, you cannot waste a single yen. You are required to reconsider how you use money. It is my hope that the field of “behavioral economics”, which is taken up by this book, will help people to do this.
Different from the hitherto dominant, so-called traditional economics, behavioral economics, which develops theory from the actual behavior of consumers, focuses on the “irrational” side of human beings. Knowing what is irrational about yourself may lead to a reduction in wasteful spending and unnecessary consumption. Of course, by knowing the behavior of your consumers, the quality of marketing practice may also improve.
However, the areas in which behavioral economics is useful are not limited exclusively to consumer behavior. Through knowing the “habits of decision making” that humans possess as well as knowing the trends in their behavior, you will be able to steer people in a good direction, which is effective in the management of subordinates and one’s own “self-realization”. Moreover, in the midst of the Corona (COVID-19) crisis, behavioral economics has caught the attention of both governments and companies. For example, “nudge” theory, which involves the use of the elbows to encourage people to do things by nudging them, could be effective in campaigns to prevent them from gathering together.
This can benefit both those who consume and those who make the products that they consume. In other words, behavioral economics has the potential to benefit everyone. I sincerely hope that this book, which looks at such an area, may be useful to as many readers as possible.
(Written by ABE Makoto, Professor, Graduate School of Economics / 2022)