We now consider problems in which the situation is not as simple as “first we make the decisions, then we observe the uncertainty and compute the costs”

When you switch on your smartphone, you are probably not aware of all the minerals that have been dug up around the world to make the electronics work. An iPhone screen has been polished with lanthanum and cerium, a magnet inside is made with neodymium and praseodymium, the circuitry in semiconductors uses arsenic metals, rechargeable batteries depend on cadmium, and light bulbs and heating elements rely on tungsten. It turns out that these so-called “rare earth” minerals are essential for modern life and are used in products ranging from smartphones to MRI machines to advanced defense technology to hair dryers.

You may not know it, but the tomato has always been the subject of controversy. Botanists debate whether the tomato is a vegetable or a fruit (it is actually a fruit). Linguists debate whether it is pronounced as to-may-toe or to-mah-toe (who cares!). Meanwhile, agricultural economists debate where the best place to produce this nutritious and delicious crop might be.

The introductory chapter sets the stage for the rest of the book. It begins by tracing the historical development of behavioral economics, then giving a working definition of the subject, followed by a discussion of the scope of behavioral economics. In particular, the various kinds of data that form the basis of inferences in behavioral economics are discussed. These include observational data, experimental lab data, field data, survey data, and neuroeconomic data. It is argued that no particular source of data holds hierarchical sway over any of the other sources of data. All sources of data have their pros and cons, and we need all of them to build a more rounded understanding of human behavior. We lay great emphasis on the scientific method and describe best practice in the natural sciences, following the Popperian tradition. It is vital that students get themselves well versed in these ideas to put them in the right frame of mind for taking a course in behavioral economics.

Chapter 2 relaxes two features of EU: linear probability weighting and utility defined over final wealth levels. Our main focus is on prospect theory (PT). The salient features of PT are reference dependence (utilities are derived from changes in wealth relative to a reference point), loss aversion (losses bite more than equivalent gains), and inverse S-shaped probability weighting functions that replace the “linearity of probabilities” in EU. Under PT, attitudes to risk are determined “jointly” by the shapes of the utility function and the probability weighting function, giving rise to a four-fold pattern of risk attitudes. We also give an exposition of rank dependent utility. We consider several applications of prospect theory. These include, exchange disparities; optimal contracts; tax evasion puzzles; backward bending labor supply curves; attitudes towards low probability events, and loss aversion among professional golf players. Close primate relatives also exhibit loss aversion; thus, loss aversion precedes the evolutionary separation of humans from close primate relatives. We also apply PT to the Ellsberg paradox.

Extensive empirical evidence demonstrates that humans possess other-regarding preferences, that is, they care about the well-being of others, in addition to their own. Humans are predisposed to cooperate with each other, but they are conditional cooperators; they respond to kindness with kindness and unkindness with unkindness. The intentionality of actions by others is important in judging the unkindness of their actions. This chapter explores the evidence on human sociality, using several experimental games such as: the ultimatum and dictator games, the trust and the gift exchange games, and the public goods game with and without punishments. The external validity of lab experiments is also considered. Other topics include the evolutionary origins of preferences and the behavioral differences between WEIRD and non-WEIRD societies. We consider the role of human morality and the aversion to lying and breaking promises. Even when lies cannot be discovered, a significant fraction of people chooses to remain honest, while others tell partial lies and only a few lie maximally. We also outline social identity theory, whereby humans treat ingroup members more favorably relative to outgroup members.

In September 2008, the oldest investment bank on Wall Street, Lehman Brothers, declared bankruptcy. Immediately, the world’s financial system seized up. Hundreds of billions of dollars’ worth of financial assets were frozen in place, the value of securities made uncertain, and the solvency of seemingly rock-solid financial institutions called into question. By the end of 2008, the United States’ economy was in freefall, shrinking at an annualized rate of 8%. Growth rates in other major industrialized economies also plummeted as well. The recession was so deep, and the recovery so labored that it took more than a decade for output to return to full employment levels.

It is not uncommon for a student to display difficult behaviour at some point in their development. For some students, however, difficult behaviour is so frequent, persistent and severe that it has significant detrimental impacts on their affective, cognitive and behavioural engagement with education and quality of life. Teachers play a critical role in strengthening these students’ engagement with education. This chapter will provide a description of some of the emotional and behavioural disorders witnessed in school-age children and identify the associated behaviours that teachers might see in the classroom. Further, it will review and critique some of the common strategies used in schools to bolster positive behaviour and engagement with education for these vulnerable students.

We live in an era of globalization, in which most producers operate internationally on a global scale. We, as consumers, are affected by events taking place on distant shores – to say we live in an age of interconnectedness is a cliché, but it is still true. Just check out the labels on the clothes in your closet. Your shirts, sweaters, jackets, and jeans were probably not produced in the United States. More likely, they were made in China, Bangladesh, Vietnam, India, Sri Lanka, or Mexico. The same is true for your shoes.

We live in an era of globalization, in which most producers operate internationally on a global scale. We, as consumers, are affected by events taking place on distant shores – to say we live in an age of interconnectedness is a cliché, but it is still true. Just check out the labels on the clothes in your closet. Your shirts, sweaters, jackets, and jeans were probably not produced in the United States. More likely, they were made in China, Bangladesh, Vietnam, India, Sri Lanka, or Mexico. The same is true for your shoes.

Most schools and departments of education have behavioural expectations of their students. The degree to which the individual teacher has a say over how they run their class can differ widely. In some contexts, it is completely left up to the teacher to decide the best way to manage student behaviour. In other schools, all teachers will be required to follow the exact same procedures, right down to scripting language of what to say in certain situations. Most schools sit somewhere in the middle, where they will have a school-wide approach to promote consistency, but the running of the classroom is left to the professionalism of the teacher.

School-wide approaches differ in their underlying philosophy and research base. This chapter will examine four common approaches that are used in Australian schools and analyse them in terms of their potential for increasing student engagement.

Communicating Across Cultures – Bridging and Integrating. Bridging and integrating are, respectively, the second and third stages of the Map-Bridge-Integrate (MBI) model. There are three skills important to effective communication in a cross-cultural setting: engaging, decentering, and recentering. The three skills help improve all communication anywhere. An important theme is that mindful global leadership requires taking account of the context of the interaction. In interactions within a single culture, people generally operate with the same set of background assumptions often without people even being aware that they are doing so. The more culturally diverse the setting, the more difficult it is to recognize the assumptions, and the more explicit they should be. Although there are many ways that cross-cultural interaction can go wrong, they tend to fall into two basic patterns: destroying and equalizing. Much cross-cultural communication happens over email, chat, phone, video call, or other technology. Virtual communication is addressed.