Behavioural economics

People are not the model.

What changed

Classical models assume consistent, self-interested calculation. Experiments show reliable departures: loss aversion, present bias, anchoring and fairness preferences that override profit.

Defaults change behaviour enormously, which is why opt-out schemes work.
People pay to punish unfairness, which the rational model does not predict.

How it is used

Policy design, pensions and product design all now assume real behaviour rather than idealised behaviour. The same knowledge is used to make things harder to cancel.