Post by patrick on Apr 24, 2016 18:40:22 GMT
In 1776, Adam Smith published his famous book “The Wealth of Nations”, and since then his “invisible hand” philosophy has become the basis of market economy. After that, economists have been devoted to studying people’s decision making processes and trying to predict how people might do when new incentives are introduced. Based on economists’ observations, “rational people think at the margin”, “people respond to incentives” have become two principles of economics which are believed to be infallible. However, new researches and studied have shown situations where these basic economics principles cannot hold true.
When economics fails to predict people’s responses under certain situations, neuroscience comes into play, and the interdisciplinary field Neuroeconomics emerged. This combination of neuroscience and economics has come up with new explanations to people’s decision making by looking into the brain’s activities. (Examples see the readings “The Neuroeconomics of Trust” and “Neural Responses to Sanction Threats in Two-party Economic Exchange”)
So my question is: Should Econ students also study neuroscience to better understand people’s behaviors and thus make more reliable predictions?
I know that the model of “rational economic agents” still work well under most situations, but it does fail to take into account important factors such as people’s neural processes. Just as mentioned in the article “Do Economists need brains?”, it is reasonable to say that “incorporating insights from neuroscience could transform economics, by providing a much better understanding of everything from people’s reactions to advertising(the Coca Cola case) to decisions to go on strike”.