Behavioral economics of education

•We review existing literature in order to understand how approaches from behavioral economics may help us understand investments into education.•Observed education investment decisions seem puzzling when viewed through the lens of a standard economic model.•Concepts and questions studied in behavioral and experimental economics can enhance our understanding of some of the puzzles.•Concepts studied in behavioral and experimental economics are closely related to what is often referred to as “soft skills” or “non-cognitive skills” in the literature on economics of education. During the last decade knowledge about human behavior from psychology and sociology has enhanced the field of economics of education. By now research recognizes cognitive skills (as measured by achievement tests) and soft skills (personality traits not adequately measured by achievement tests) as equally important drivers of later economic outcomes, and skills are seen as multi-dimensional rather than one-dimensional. Explicitly accounting for soft skills often implies departing from the standard economic model by integrating concepts studied in behavioral and experimental economics, such as self-control, willingness to compete, intrinsic motivation, and self-confidence. We review how approaches from behavioral economics help our understanding of the complexity of educational investments and outcomes, and we discuss what insights can be gained from such concepts in the context of education.