How Psychology and Economics Intersect: The Power of Behavioural Economics

Erza S

When I first chose my A-level subjects: Maths, Psychology, and Economics, I picked them because they each interested me in different ways. Maths challenged how I thought, Psychology helped me understand people, and Economics helped me understand the world. Back then, I saw them as three separate subjects. But now, as a first-year Economics student at City, St George’s, University of London, I’ve realised how deeply connected they actually are. The point where Psychology and Economics meet, what we call Behavioural Economics, has become one of the most interesting parts of my studies so far.

Traditional economics assumes that people make perfectly rational choices: that we all weigh up the pros and cons, calculate risks, and act logically to maximise our own benefit. But Psychology tells a very different story. Human behaviour isn’t always logical; it’s emotional, social, and sometimes unpredictable. Behavioural Economics brings those two ideas together. It looks at how real people make decisions in the real world and how emotions, habits, and biases can shape those decisions.

Once you start noticing it, you see examples everywhere. At my retail job, I notice how people’s choices aren’t just about price or quality, they are influenced by how items were displayed, whether there was a “limited offer” sign, or even how busy the store felt. Customers often make impulse decisions or buy things just because they are on sale, even if they don’t plan to. That’s Behavioural Economics in action: people responding to framing, scarcity, and emotion more than logic.

The same thing happens in everyday life. Think about how often we say we’ll save money or eat healthier, yet end up doing the opposite. Psychologists call this the “intention-action gap,” and economists now study it to design better policies and systems like automatic savings plans or healthier food placements in shops. It’s about understanding that people don’t always do what’s “rational,” and instead of judging that, Behavioural Economics tries to work with it.

For me, this intersection between mind and market makes Economics feel more human. It’s not just about numbers or graphs, it’s about people. It connects what I learned in Psychology about memory, motivation, and decision-making to the real-world challenges economists face: encouraging saving, reducing waste, or improving public health.

As I move through my degree, I find myself drawn more and more to questions that sit in that middle ground: Why do people make the choices they do? and How can understanding human behaviour lead to better economic outcomes? Behavioural Economics doesn’t just make theory more interesting, it makes it more realistic.

Looking back, I’m glad I chose subjects that seemed “randomly mixed” at first. They’ve turned out to complement each other perfectly. Psychology taught me to look at what’s happening in people’s minds, while Economics taught me to look at what’s happening in the world. Together, they remind me that behind every statistic and policy, there’s a person thinking, feeling, and deciding.