In this chapter, we have addressed a group of topics collectively known as behavioral economics. The claims and predictions of behavioral economics often contradict the findings of the economic models we learned in the earlier chapters of this book. Behavioral economics describes economic decision makers (firms, consumers, governments) that make systematic and fundamental errors based on psychological biases—propensity to overconfidence, mental accounting, susceptibility to framing, sunk cost fallacies, and others. The actions predicted by behavioral economics leave biased agents open to being taken advantage of by all sorts of rational economic actors, as we have also tried to emphasize. But in some sense, the behavioral economics ideas we studied in this chapter provide a critique of the traditional microeconomics we outlined in all the previous chapters.

With that critique has come a renewed emphasis on how we test theories. The use of data to test economic theories is the realm of econometrics, and a full discussion of econometric techniques is beyond the scope of this book. We have, however, introduced some of the new ways in which economists and companies go about testing economic theories outside of econometrics by using experiments in the lab and in the field. The results from those experiments sometimes suggest the importance of behavioral economics critiques and sometimes seem to verify the usefulness of the main economic models we’ve studied.

We, the authors, strongly believe in the importance and insight of microeconomics. We recognize that the traditional models, while extremely powerful, are far from perfect. The goal of every economist should be to understand actual economic behavior. If that means discovering where the limits of our discipline lie, then we should commit to finding those limits.

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In the end, microeconomics remains one of the most useful and most important contributions humanity has ever created. What you have learned about the subject in this course can serve you extremely well in life if you will let it.14 One cannot help but be struck by the thought that if the rest of the world knew as much about economics as you now do after completing microeconomics, we would all be a lot better off.

The goal of academics is to disseminate that knowledge through teaching and writing. You can help spread that knowledge through your actions. We hope you have enjoyed the ride and that you will use what you’ve learned for the rest of your life.