List of Suggestions for Behavioural Elements in the Macroeconomic Model. WWWforEurope Working Paper No. 24

Traditional economic theory describes economic agents as being perfectly rational. According to this approach, agents possess all necessary information and have the ability to process this information to make the best decision for maximising their profit. However, in the real world this assumption does not hold for a number of reasons. First, economic agents are not in possession of all the information relevant to making decisions and furthermore, information is costly. Second, they do not have all the computational abilities needed to arrive at optimal decisions. Third, they are boundedly rational and have a number of other-regarding preferences which influence their choices. Here we provide a list with the most important behavioural biases of different stakeholders involved in a sustainability transition. This will allow us to improve macroeconomic models and associated analyses of transition policies.