Behavioural economics has fundamentally challenged the idea that people make rational financial decisions. Research by Daniel Kahneman and Amos Tversky showed that humans are predictably irrational — driven by cognitive biases, emotional impulses, and mental shortcuts. Loss aversion, for example, means we feel the pain of losing £100 approximately twice as strongly as the pleasure of gaining the same amount. Anchoring means the first price we see shapes all subsequent price judgements. Scarcity messaging and countdown timers exploit our fear of missing out. Understanding these mechanisms is important — not just for consumers trying to make better decisions, but for companies designing products, governments shaping policy, and individuals managing their own financial lives.

💡 Did you know? Daniel Kahneman won the Nobel Prize in Economics in 2002 — despite being a psychologist, not an economist. His work proved that psychology and economics are inseparable.