Behavioural economics is a exciting developing field in the study economics. It seeks to improve assumptions made in economics by incorporating behavioural science research into current economic models. Core to our understanding of economics is the assumption of rationality. This assumption flies in the face of decades of psychological research and is often used to discredit economics.
Richard H Thaler and Cass R. Sunstein explore this conflict between the assumption of rationality and behavioural science in their book, Nudge. Rather than being an attack on traditional economics, nudge provides a way of understanding human behaviour and explains why people do not always act rationally.
Topics covered include, the difference between humans and econs. Choice architecture is explained, showing how it is used to manipulate the decisions people make. This is applied to personal finance, superannuation contributions, school choice, organ donation and many other areas.
The authors subscribe to what they call a libertarian paternalist philosophy, meaning that people should be free to choose and the cost of the chooses should be low. However, through using default options, automatically renewals the consumer is nudged into making the "best" decision. Many libertarians would consider this overly paternalistic, however the use of choice architecture and nudges preserves more freedom than many regulations currently in use.
I would recommend this book to anyone interested in human behaviour and how it relates to decisions made by consumers in the marketplace.
Nudge is available for the Kindle for $10. http://www.amazon.com/Nudge-Improving-Decisions-Happiness-ebook/dp/B004YKSXXS/ref=sr_1_4?ie=UTF8&qid=1339074118&sr=8-4 If you're old school and like actual books I recommend www.betterworldbooks.com