Neuroeconomics

Valun Fun Prospect Theory

Neuroeconomics is an interdisciplinary field that seeks to explain human decision making, the ability to process multiple alternatives and to follow a course of action. It combines research from neuroscience, economics, and psychology. As research has progressed, neuroeconomics has been praised for its potential to provide insight into both microeconomic and macroeconomic models.

History

Neuroeconomics emerged in the early 21st century, with the term being coined by Paul Glimcher. It was initially met with skepticism from both neuroscientists and economists, but has since gained acceptance as a legitimate field of study.

Methodology

Neuroeconomics studies typically employ a combination of experimental economics and functional neuroimaging. In these studies, participants' neural activity is monitored while they make economic decisions.

Key Concepts

Expected Utility Theory

Expected Utility Theory is a key concept in neuroeconomics. It is a theory of how people make decisions under uncertainty and risk.

Prospect Theory

Prospect Theory, developed by Daniel Kahneman and Amos Tversky, is another important theory in neuroeconomics. It describes how people make decisions involving risk, particularly financial decisions.

Neurobiological Models of Economic Decision Making

Neuroeconomics also involves the development of neurobiological models of economic decision making. These models aim to explain the neural mechanisms that underlie economic behavior.

Criticisms

Despite its potential, neuroeconomics has been criticized for its reliance on reductionism, as well as for the difficulty of translating its findings into practical economic policy.

See Also

• Behavioral economics
• Cognitive neuroscience
• Experimental economics
• Game theory
• Neurofinance