On the Nascent Field of NeuroEconomics

The Chronicle of Higher Education recently had a really nice piece on the intersection of economics and biology that author Josh Fischman did a lot better job of explaining than I could:

"Neuroeconomics came into being around the turn of this century, growing out of a critique of the basic idea in economics that people are driven by rational attempts to maximize their own happiness. A new breed of behavioral economists had noted that in reality, individual definitions of "maximize" and "happiness" seemed to vary. Neuroeconomists added the idea that, by mapping parts of the brain doing the maximizing and the happiness-defining, they could better account for those actions.

Through experiments, researchers have shown that when people reject a low, unfairly priced offer, a part of the brain associated with disgust kicks in, but that when they view the offer as fair, a brain region linked to reasoning seems more active. Researchers have also tackled the puzzle of "overbidding," when people pay too much for something. An area called the striatum, associated with rewards, is more active when people bid high in an auction because they fear losing an item, but is not as active when they think they have a good chance of winning. So fear of losing may be key to things like overvalued stocks.

Other research has shown that decisions to be very social and involved with a group, rather than hang on the fringes, may be linked to an especially active gene for dopamine, a neurotransmitter—and that the social tendency may be inherited."

Anyone curious can find the full article here.

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