I have just finished reading Predictably Irrational, a book by Dan Ariely on why economic thinking is flawed due to its failure to include behavioural economic concepts. In economics the actions of people are summed up by Homo Economicus, an imaginary figure that is completely rational and bases all its actions upon these rational foundations. Obviously not all humans are as rational as Homo Economicus, and this causes inconsistencies in economic models.
Dan Ariely argues that if we use findings from behavioural economics (a branch of economics that incorporates psychology) and mould these into our economic models, then we will improve our models and will thus have a better understanding of how the economy actually works. [...]