Abstract

The purpose of “behavioural education economics” is to understand the psychological factors influencing educational choice and how individuals optimise these investments within a cognitively hard and complex decision space. Underlying behavioural education economics is the understanding that educational decision making is characterised by choices which are usually not repeated and rely heavily on heuristics to solve complex decisions in the absence of prior learning. By understanding the decision architecture underlying choices in education, causal mechanisms can be identified to guide policy interventions to improve academic outcomes which ultimately influence earnings and other life outcomes such as health. Given that individuals deploy heuristic based decision strategies to arrive at a “good” outcome in the face of incomplete information and limited time (Gigerenzer & Goldstein, 1996), it is important to understand the cognitive processes underlying these strategies and the impact of behavioural biases (Tversky & Kahneman, 1974) which lead to unintended social and economic consequences. Behavioural biases that can affect decisions in education include anchoring, framing, loss aversion, the availability heuristic and prospect theory. Behavioural education economics matters because for the last 30 years rational choice theory based education policy has failed to generate the expected economic outcomes, delivering only marginal overall benefits at best.