Neuroeconomics – Hype or Hope?
You may have perhaps heard of game-theory and behavioral economics, but like many within and outside the field the term neuroeconomics seems to be a revolutionary one. Neuroeconomics is, briefly put, an innovative research program, which combines findings and modeling tools from economics, psychology and neuroscience to account for human choice behavior.
Neuroeconomics is, make no mistake about it, a discipline of its own, with a growing number of professionals getting more and more involved in its development. Over the last few years, all over the world many leading universities have started their own lab or center for neuroeconomics. Now, you may be asking yourself:
Labs are fundamental to neuroeconomics because the latter is interested in exploring decision making processes from a neurological perspective. Subjects’ decisions take place in a strictly controlled environment and are later explained as the product of cohesive decision making structures, which would originate in the brain. The buzz about neuroeconomics comes about because its findings challenge the predictions of traditional economic thought about individual behavior. By using algorithms that map environmental variables on to choices, neuroeconomics promises to potentially improve our understanding of “how and why” individual choices deviate from traditional economic theory.
A new way of thinking economic science
After a first glance, one may get the impression that neuroeconomics is all about the one-way transfer of insights from neuroscience to economics. On a closer look the story behind it is actually more complicated — and certainly more interesting! With neuroeconomics, hot topics from not only traditional economics, but also from other fields are critically assessed and strongly challenged. Theories of human choice based on the mind/body divide, as well as deterministic approaches to decision making, will find themselves part of the heated debate that is likely to emerge from this innovative field. neuroeconomics, furthermore, calls into question the relationship between economics and psychology. Whether psychology will be shoved away by neuroscience is still to be seen, but its established link with economics is surely to be contested.
As with most emerging disciplines neuroeconomics is not free of criticism. Some renowned economists, like Ariel Rubinstein and Glenn Harrison, have argued that neuroeconomics has to pace itself, in order to avoid making big conclusions based on scanty data. These authors healthy dose of skepticism is most likely to encourage, rather than deter enthusiasts of neuroeconomics.
At the moment it is yet to be seen how neuroeconomics can indeed impact the field as a whole, but if it did, it is likely to be loud bang.
Will financial floor traders, for instance, be reduced to predictable decision making machines? Or, could the decision making process of CEO’s involved in a merger become less of a black-box of rationality and more of an impulsive flow of feeling and gut?
These are, among many others, the type of questions that could make or break neuroeconomics. It remains for now an open question, whether its efforts will indeed represent a hope for the economies of tomorrow, or mere hype for the outsider economists of today.
Rubinstein, A. (2008). COMMENTS ON NEUROECONOMICS Economics and Philosophy, 24 (03) DOI: 10.1017/S0266267108002101
Schipper, B. (2008). ON AN EVOLUTIONARY FOUNDATION OF NEUROECONOMICS Economics and Philosophy, 24 (03) DOI: 10.1017/S0266267108002113
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