Neuroeconomics
Neuroeconomics is an interdisciplinary field that seeks to explain human decision-making, the ability to process multiple alternatives and to follow through on a plan of action.
Neuroscience has the potential to reduce the reliance on this flawed assumption by inferring what emotions, habits, biases, heuristics and environmental factors contribute to individual, and societal preferences.
The economic decisions researched can cover diverse circumstances such as buying a first home, voting in an election, choosing to marry a partner or go on a diet.
Behavioral economists, in particular, sought to challenge neo-classicists by looking for alternative computational and psychological processes that validated their counter-findings of irrational choice.
Numerous neurobiologists claimed that attempting to synchronise complex models of economics to real human and animal behavior would be futile.
Organized by neuroscientist Jonathan Cohen and economist Christina Paxson, the Princeton meeting gained significant traction for the field and is often credited as the formative beginning of the present-day Society for Neuroeconomics.
[5] The subsequent momentum continued throughout the decade of the 2000s in which research was steadily increasing and the number of publications containing the words "decision making" and "brain" rose impressively.
For example, Padoa-Schioppa & Assad tracked the firing rates of individual neurons in the monkey orbitofrontal cortex while the animals chose between two kinds of juice.
This suggests that, in accordance with the economic theory of decision-making, neurons are directly comparing some form of utility across different options and choosing the one with the highest value.
[23] In addition to the importance of specific brain areas to the decision process, there is also evidence that the neurotransmitter dopamine may transmit information about uncertainty throughout the cortex.
It revealed that females are in average more risk averse, but the difference between genders vanishes for low organizational and activational testosterone exposure leading to risk-averse behavior.
Students with high salivary testosterone concentration and low digit ratio, disregarding the gender, tend to choose risky career in finance (e.g. trading or investment banking).
[27] In 2017 March, Laurence T. Hunt and Benjamin Y. Hayden argued an alternative viewpoint of the mechanistic model to explain how we evaluate options and choose the best course of action.
They emphasized how several features of neuroanatomy may support the implementation of choice, including mutual inhibition in recurrent neural networks and the hierarchical organization of timescales for information processing across the cortex.
Studies have found that skin conductance,[32] pupil dilation and heart rate[33] are all higher in response to monetary loss than to equivalent gain.
In addition to risk preference, another central concept in economics is intertemporal choices which are decisions that involve costs and benefits that are distributed over time.
[15] Neuroeconomic research in intertemporal choice is largely aimed at understanding what mediates observed behaviors such as future discounting and impulsively choosing smaller sooner rather than larger later rewards.
In humans, a reduction in cortisol, released by the hypothalamus in response to stress, is correlated with a higher degree of impulsivity in intertemporal choice tasks.
This idea is supported by neural imaging studies demonstrating a high degree of activation in the ventral striatum when individuals cooperate with another person but that this is not the case when people play the same prisoner's dilemma against a computer.
[49] It has been shown that low-frequency repetitive transcranial magnetic stimulation of DLPFC increases the likelihood of accepting unfair offers in the ultimatum game.
The neurobiological basis for this preference includes neurons of the lateral intraparietal cortex (LIP), which is related to eye movement, and which is operative in situations of two-alternative forced choices.
[54] Behavioral economics experiments record the subject's decisions over various design parameters and use the data to generate formal models that predict performance.
[9] Richard Thaler provides a prime example in his book Misbehaving, detailing a scenario where an appetiser is served before a meal and guest accidentally fill up of it.
[11] Previous studies investigated the behavioral patterns of patients with psychiatric disorders, or neuroeconomics of addiction, such as schizophrenia,[61] autism, depression,,to get the insights of their pathophysiology.
Many experiments involve the participant completing games where they either make one-off of repeated decisions and psychological responses and reaction time is measured.
[6] [64] Harris surmises that much of the neuroscience-assisted insights into economic modelling is "academic marketing hype" and that the true substance of the field is yet to present itself and needs to be seriously reconsidered.
[68] These comments echo a salient and consistent argument of traditional economists against the neuroeconomic approach that the use of non-choice data, such as response times, eye-tracking and neural signals that people generate during decision-making, should be excluded from any economic analysis.
While broader neuroeconomics has more academic aims, since it studies the basic mechanisms of decision-making, neuromarketing is an applied sub-field which uses neuroimaging tools for market investigations.
Another neuroscientist, Emily Falk contributed to the neuroeconomics and neuromarketing fields by researching how the brain reacts to marketing aimed at evoking behavioral change.
[78] Meanwhile, the campaign ranked least likely to be effective by the experts and audience, generated the strongest neural response in the medial prefrontal cortex and resulted in the largest number of people deciding to quit smoking.
