Marketing departments and businesses can’t always predict how consumers will react to their products. However, behavioral economists came to the forefront to assist corporations in understanding why anomalies exist in economic models.
“Before the 1800s and as far back as the 1600s, there are instances of studying human behavior and its relationship to consumer behavior/markets,” Schwab says. “These two areas of study separated in the 1800s as economists developed more scientific ways to study human behavior. Psychology at that point was not a very scientific area of study—while economics had mathematical models that were used to predict markets.”
“Eventually, psychology and economics came back together to try to explain anomalies in long-standing economic models. The work done by Herbert Simon (an economist) in the 50s started to re-build this bridge. He was the first to note a phenomenon called Bounded Rationality—the idea that we are limited in our abilities to make decisions.”
“The experiments that really led to behavioral economics that we know today were led by Kahneman and Tversky in the 70s and changed how we conceptualized consumer behavior. They won a Nobel Prize in economics many years ago (though they were psychologists) for their seminal work.”
Schwab, TCSPP’s Associate Department Chair in the Business Psychology Division, holds a B.A. in Psychology: Neuropsychology; an M.A. in Industrial/Organizational Psychology: Organizational Effectiveness; and a Psy.D. in Business Psychology. As a member of multiple organizations that focus on industrial and organizational industries, consumer behavior, and neuropsychology, she’s used her educational background in several fields—restaurant/bar, legal, academic/education, and marketing.
In the legal industry, she worked on ethical conflict checks for attorneys to narrow down which cases they could represent. In restaurants and bars, building a rapport between consumers and workers brings in repeat customers. In academics and education, the B.E. focus was on potential outcomes for students. And in marketing, even the most minute assignment, such as studying how a product like a soup broth connected to consumers’ childhood memories, became particularly handy for advertising departments.
Schwab’s passion for business psychology expanded enough to make her dedicate a year and a half to developing a master’s program in behavioral economics at TCSPP. For both psychology students and business students, she highly recommends exploring these courses.
“Business is valuable, and psychology really fleshes out the rest of the picture about why people are doing the things that they’re doing—such as their motivation, perceptions, how they process information, and emotions,” Schwab says. “These are the reasons why most MBA programs now are integrating some sort of psychology class into their curriculum. It really helps to give students and business professionals an understanding of human behavior.”
In addition to helping students and other business professionals, Schwab believes that she learned a lot about herself personally and professionally by getting two out of three of her degrees from TCSPP.