Behavioral Economics of Higher Education

This chapter reviews behavioral economics research on college student success and discusses its implications for higher education practice and policy. It discusses human capital theory, summarizes behavioral economic concepts relevant for higher education, examines how behavioral economics might help students succeed in higher education, and discusses implications for future work. Behavioral economics offers a coherent framework that explains behaviors that seemingly contradict standard economic thinking about human decision-making. Prospect theory is a cognitive psychology theory used in behavioral economics. Loss aversion acts like gravity pulling the decisions away from risky changes toward known and therefore perceived-as-safer behavior patterns. Behavioral economics also challenges two less frequently mentioned assumptions of mainstream economics: that decision-makers are self-interested only and that they have self-control sufficient to carry out their rational and self-interested plans. Nudges have been a common policy instrument proposed by behavioral economics.