Behavioral economics is a field of study that applies insights from psychology to decision-making. It illuminates outcomes that might be deemed irrational according to classic economic theory. Why, for example, do we often think we know what we want, only to be disappointed with our purchases and choices?
In the model of rational action assumed by classical economics, a person is expected to weigh the benefits and drawbacks of an action and then choose the best possible option; behavioral economics demonstrates that people rarely behave in this manner. Individuals are often influenced by emotions and innate biases (such as future discounting) to make choices that are not in their best interests in the long run.
What's more, many decisions must be made under conditions of great uncertainty, where not much is known about all the risks and benefits of a choice or where those features are constantly shifting. Behavioral economics aims to understand the effects of uncertainty on decision-making in such realms as consumer purchasing and financial savings.