This lecture discusses how behavioral economics combines psychology and economics to study how real people make decisions, often irrationally, unlike the idealized homo economicus. It examines biases (e.g., procrastination, misjudging probabilities) and non-monetary motivations (e.g., time, emotions) in choices. Examples include Thaler’s findings on illogical preferences and taxi drivers stopping work after hitting income targets. The field contrasts mainstream economics' rational "should" with actual "is" behavior, refining models for real-world applications like policy nudges. Pioneers like Kahneman and Thaler bridge disciplines to explain systematic deviations from rationality.