Neuroeconomics Research Paper Example

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Neuroeconomics is a new and emerging approach in the social sciences that integrates theories, methodologies, and ideas from neuroscience, economics, and psychology to study how individuals make economic decisions. Typically, research in this field involves observing neurological activity in  experimental  tasks  and  situations, through brain imaging in humans (which monitors electrical activity or blood flow in clusters of neurons) and single neuron measurements in animals (which monitors individual neurons firing via tiny electrodes inserted into an animal’s brain). By linking observed behaviors with the neurons  and  brain  regions that  activate during  such actions, neuroeconomic researchers seek to discover not only the functionality of various brain regions, but also the underlying processes that occur in decision-making as different neural systems interact. While the full benefits of this new interdisciplinary approach are still unclear, neuroeconomics has generated excitement due to its potential to  advance the  existing behavioral theories of its contributing disciplines. Particularly, as neuroscience and psychology are closely related fields, neuroeconomics strongly supplements behavioral economics, a subfield that seeks to  integrate psychology into  the rational-choice framework of neoclassical economics. Indeed, by providing a window into what was previously regarded as the “black box” of the brain, neuroeconomics can improve the accuracy of our existing decision-making models and generate new insights into the basis of economic behavior.

One  illustration  of  the  potential  insights derived from neuroeconomics can be found in the neuroscientific version of the classic two-player “ultimatum game” from game theory. In the traditional game, the first player is asked to decide how much of a sum of money he wishes to keep for himself and how much he wishes to offer to a second player. The second player can either accept this offer, in which both players receive the amount allocated to him by the offer, or reject it, in which neither party receives any money. While economic theory suggests that the  second partner  will rationally accept any nonzero offer, in  behavioral economic experiments the  second player typically rejects low offers (e.g., two dollars, when the other player receives eight dollars). When the experiment is conducted using functional magnetic resonance imaging (fMRI),  brain  scans of participants who face unfair offers indicate heightened neural activity in two competing brain regions: the bilateral anterior insula, a region associated with the emotions of anger, distress, and disgust, and the dorsolateral prefrontal cortex (dlPFC), a region associated with reasoning and deliberation. Interestingly, when  insular  activation  exceeded dlPFC activation,  participants  typically rejected  low  offers, whereas when dlPFC activation exceeded insular activation,  participants typically accepted these same offers. This finding expands our knowledge of decision-making in the traditional game theory experiment by revealing the presence of multiple, competing processes in the brain (in this case, representing affect versus cognition) that directly determine the subject’s final choice.

Neuroeconomics currently faces some criticism from skeptics in its parent disciplines who are uncertain about the utility that can be gained from combining such dissimilar approaches to decision-making and behavioral analyses. Some  neuroscientists question  the  usefulness of research involving fMRI—the most common neuroscientific technology employed in the field—because such techniques only capture images of the brain every few seconds (while neural activity occurs in milliseconds) and cannot detect activity that is less than 3 millimeters long (while neural activity can occur at 0.1 millimeters). Even among supporters of this new field, there are general inconsistencies in the perceived goals and purpose of neuroeconomics. Within  this field, some neuroscientists apply the  most basic elements of rational choice theory to explain neural activity—emphasizing findings such as the  existence of neurons  in  monkeys  that  calculate physiological or expected utility—while some economists use neuroscience to expand upon  rational choice theory and incorporate non-orthodox  perspectives of  economic behavior (e.g., from psychology and sociology). Overall, neuroeconomics is a new interdisciplinary field with many questions still left to answer. With likely advances in neuroscience technologies in the future, we may soon know much more about  how  useful the  neuroeconomic  approach  is  to decision-making research, and how individuals truly arrive at the economic decisions that they make.

Bibliography:

  1. Camerer, Colin, George Loewenstein, and Drazen Pr 2005. Neuroeconomics: How Neuroscience Can Inform Economics.  Journal of Economic Literature 43: 9–64.
  2. Cassidy, J 2006. Mind Games: What Neuroeconomics Tells Us about Money and the Brain. The New Yorker (18 September): 30–37.
  3. Glimcher, Paul W., Michael Dorris, and Hannah Bayer. 2005. Physiological Utility Theory and the Neuroeconomics of Choice. Games and Economic Behavior 52: 213–256.
  4. Sanfey, Alan , George Loewenstein, Samuel M. McClure, and Jonathan D. Cohen. 2006. Neuroeconomics: Cross-currents in Research on Decision Making. TRENDS in Cognitive Science 10 (3): 108–116.

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