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Neuroeconomics

History and Emergence of Neuroeconomics: – Neuroeconomics emerged in the late 1990s. – Paul Glimcher’s involvement at the Center for Neural Science at NYU in […]

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History and Emergence of Neuroeconomics:
– Neuroeconomics emerged in the late 1990s.
– Paul Glimcher’s involvement at the Center for Neural Science at NYU in 1989 was pivotal.
– Advancements in brain imaging technology facilitated the crossover between behavioral and neurobiological research.
– The tension between neoclassical and behavioral economics spurred the emergence of neuroeconomics.
– Initially faced criticism from neurobiologists and neoclassical economists.

Major Research Areas in Neuroeconomics:
– Decision-making processes involve selecting the option with the highest utility value.
– Brain activity during decision-making processes is studied.
– Some research uses animal models for controlled studies.
– Neurons in the orbitofrontal cortex correlate with utility values.
– Prefrontal cortex dysfunction correlates with economic attitudes and behavior.

Decision-making under Risk and Ambiguity:
– Most decisions involve uncertainty, with risk involving known probabilities and ambiguity involving unknown probabilities.
– Utility maximization explains decision-making.
– Neuroeconomics focuses on decision-making under risk and ambiguity.
– Daniel Bernoulli’s utility maximization proposal in 1738 is foundational.

Interdisciplinary Approach of Neuroeconomics:
– Combines neuroscience, experimental economics, and psychology.
– Incorporates tools from theoretical biology, computer science, and mathematics.
– Behavioral economics integrates social and cognitive factors.
– Aims for an integrated account of economic decision-making processes.

Neuroeconomics and Decision-making Processes:
– Neuroeconomics helps economists predict human behavior accurately.
– Expected utility and rational agents are still used in mainstream economics.
– Neuroscience reduces reliance on flawed assumptions of rational choice.
– Various tools are integrated for a comprehensive approach to economic decision-making.

Neuroeconomics (Wikipedia)

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. It studies how economic behavior can shape our understanding of the brain, and how neuroscientific discoveries can guide models of economics.

It combines research from neuroscience, experimental and behavioral economics, and cognitive and social psychology. As research into decision-making behavior becomes increasingly computational, it has also incorporated new approaches from theoretical biology, computer science, and mathematics. Neuroeconomics studies decision-making by using a combination of tools from these fields so as to avoid the shortcomings that arise from a single-perspective approach. In mainstream economics, expected utility (EU) and the concept of rational agents are still being used. 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. Economists can thereby make more accurate predictions of human behavior in their models.

Behavioral economics was the first subfield to emerge to account for these anomalies by integrating social and cognitive factors in understanding economic decisions. Neuroeconomics adds another layer by using neuroscience and psychology to understand the root of decision-making. This involves researching what occurs within the brain when making economic decisions. 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. Using tools from various fields, neuroeconomics works toward an integrated account of economic decision-making.

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