A REVIEW OF THE MAIN DIFFERENCES BETWEEN BEHAVIORAL AND TRADITIONAL ECONOMICS: A FOCUS ON THE IMPACT OF NUDGE THEORY ON PUBLIC POLICIES AND ITS APPLICATIONS

Abstract

This paper explores the distinctions between behavioral and traditional economics by analyzing recent literature. It underscores the importance of employing nudge theory in economic decision-making, its impact on consumer choices, and its role in shaping public policies. Data synthesis involved a search across EBSCO Discovery, Google Scholar, and databases like Academic Search Complete, Business Source Premium, and ScienceDirect, yielding 40 relevant articles from 324 initial results. The study contrasts traditional economics, rooted in individual rationality, with behavioral economics, which incorporates psychological and neurological factors. Results reveal that Nudges are recognized as cost-effective, behavior-focused interventions, successfully applied in diverse policy contexts. The Nudge theory's ability to influence behavior through positive reinforcement and indirect suggestions is highlighted. This paper underscores the value of leveraging behavioral economics with nudges to inform decision-making in marketing, social policy, and economic development.