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Prof. Richard Macdonald, PhD: The Master’s degree programme that is about to start at VFU "Chernorizets Hrabar" has applications both in the business world and at the level of the average consumer

Prof. Richard Macdonald, PhDin Economics at the University of Binghampton, lecturer of economics at St. Cloud State University, Minnesota, in an interview for Focus Radio - Varna.

 

    Focus: Prof. Macdonald, what is behavioural economics and in what aspects can it be useful to us?

    Prof. Richard Macdonald, PhD: Behavioural economics is a new method for explanation of effective economic decisions that consumers take. This matter was borrowed not only from economics, but it uses techniques from psychology to explain those traits of human behaviour that are irrational and at first glance seem to be not completely logical. In traditional economics, we say that people take a decision, aiming to make the optimal choice and to preclude recurring mistakes. But it turns out that the situation in real life is not like that. People make these mistakes and that is what we try to explain in behavioural economics, why

they make them and in what way they could be predicted and explained.  

    Focus: Prof. Macdonald, presidential elections are forthcoming in Bulgaria. How can people be sure relying on behavioural economics that they make a purposeful choice without being influenced by other factors?

    Prof. Richard Macdonald, PhD: People often do not make perfectly informed choice during political elections because they avoid certain information. In the field of economic theory specific studies have been conducted regarding the way the voters take their decisions. The results show that people avoid certain set of information and do not seek it any more. We have found out that it is very difficult in behavioural economics for a voter to get a full picture of all the information that would be needed to make a perfectly informed choice, and often this information turns out to be unnecessary. So, it is much easier for the voters to resort to a solution that omits certain information and concentrates on other aspects of what the candidate represents and offers. On a large scale behavioural economics supports and helps the business to make better decisions and to interpret consumer behaviour. This is useful in determining the policies of the countries in order to be better constructed and to achieve more easily the objectives of the overall social policy and better to serve society as a whole.

    Focus: How can we be sure that our choice is independent and optimal when our environment is filled with manipulative information? How to avoid the impact of the ads that suggest to us different attitudes?

    Prof. Richard Macdonald, PhD: According to behavioural economics there are many factors which form the consumer choice so that it will be in the long term. What matters are very simple things, such as how a form to fill in will be constructed and whether the consumer will specifically have to note whether they have the desire to participate in something or not to participate. These factors alter to extraordinary degree the approach towards the choice that will be taken and can be used, for example, for pensioners – how they could control their savings in the future or in many other fields. Based on the statement that in behavioural economics the smallest things are actually of crucial importance, if we present the choice in such a way as to make it more difficult of access, it will have an impact.

     Focus: If we, as adults tend to understand behavioural economics and put it into practice when we make decisions every day, how to protect our children, who are actually the most vulnerable group in terms of manipulation?

    Prof. Richard Macdonald, PhD: If we want our children to eat less desserts and if we attempt to limit their possibility to take confectionary, they will actually consume in smaller quantities. Accordingly, it is very important what the arrangement of food we offer in a cafe or restaurant will be, because it has a direct impact on consumer choice. It means that if the desserts are placed where they are less accessible, they will be of less demand and children

will consume less of them. Surveys have shown that the solution to one of the major problems in the US and around the world - obesity can be solved with the use of smaller sized plates. In this case, it appears that their use at home, restaurants and fast food restaurants will significantly reduce food intake. In fact, one of the main instructions in behavioural economics is that the cost of a product is crucial and if economic theory says that there is no difference whether you sell two products at a 50% discount or we will apply a strategy to trade one of them at a normal price, and the other goes free with the first one, all surveys in behavioural economics show that there is a big difference. It turns out that an offer in which one commodity is at a standard price, and the other is presented as a gift, would be much preferred and will lead to more sales.

    Focus: Where will pursue a career those wishing to enroll in the Master’s degree  programme of Behavioural Economics?

    Prof. Richard Macdonald, PhD: The Master's degree programme, which will be launched soon at VFU "Chernorizets Hrabar" has applications both in the business world and at the level of the average consumer. Currently, the university is the only institution in Bulgaria, which offers such a Master’s degree programme. In fact, its application is very broad. It is applicable not only in business where we have to take managerial decisions but also in the cases in which we strive to motivate better the choice of our potential customers. It is crucial to how a decision is taken by governmental authorities and any other important area of ​​society. Whether you are a financial advisor who wants to provide a better offer for their clients or you are a marketer who wants to increase sales of their business or a politician whose goal is to achieve a specific social purpose, or you are just an ordinary person who wants to make a better justified and reasoned choice in their daily lives, behavioural economics has something to teach us and improve our choice to make it optimal. A curious fact about the Master’s degree programme itself whose launch is expected soon is that all the studies and results can be graphically illustrated by experiments in a real environment, showing that consumer behavior is very different from what is considered to be the norm.

 

Denitsa Nikolova


by ВСУ Черноризец Храбър

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