WEBVTT 1 00:00:11.000 --> 00:00:15.999 In a perfect world, we'd spend our money on only the things that we absolutely need 2 00:00:16.000 --> 00:00:20.999 We'd be rational robots that use perfect logic to determine what to buy: 3 00:00:21.000 --> 00:00:25.999 $10 comes in, $10 goes out to meet our basic needs to survive. 4 00:00:26.000 --> 00:00:27.999 And that's what we mean when we talk about economics: 5 00:00:28.000 --> 00:00:32.999 The science of how people buy and use goods based on rational thinking. 6 00:00:33.000 --> 00:00:34.999 But we're not rational robots; 7 00:00:35.000 --> 00:00:39.999 we're emotional humans whose decisions can be heavily influenced by emotion. 8 00:00:40.000 --> 00:00:42.999 If you've ever gone to the grocery store when you're hungry, 9 00:00:43.000 --> 00:00:48.999 you know what we're talking about: research shows that not only does everything look good when we're hungry 10 00:00:49.000 --> 00:00:55.999 but we're also willing to pay more for it. Clearly, this makes the theory of economics pretty flawed. 11 00:00:56.000 --> 00:01:00.999 Truth is, just about every decision we make involves an element of irrationality. 12 00:01:01.000 --> 00:01:02.999 We can't help it, we're humans. 13 00:01:03.000 --> 00:01:06.999 And that's essentially the definition of behavioral economics. 14 00:01:07.000 --> 00:01:09.999 This science takes into account our feelings, 15 00:01:10.000 --> 00:01:11.999 our biases and our internal motives... 16 00:01:12.000 --> 00:01:14.999 ...that can lead us to making choices that don't make sense 17 00:01:15.000 --> 00:01:17.999 -- at least to regular economics. 18 00:01:18.000 --> 00:01:21.999 But the way our brains are wired also influence our choices. 19 00:01:22.000 --> 00:01:25.999 Your brain comes pre-programmed to light up in response to certain financial decisions, 20 00:01:26.000 --> 00:01:29.999 which helps to explain why saving comes so easily to some 21 00:01:30.000 --> 00:01:31.999 and seems impossible to others. 22 00:01:32.000 --> 00:01:34.999 This science is called neuroeconomics, 23 00:01:35.000 --> 00:01:40.000 and it focuses on this fascinating study of your brain and your brain on money.