Transcript

How neuroscience informs behavioral economists. Economists believe that people are rational decision makers. Von Neumann and wangsten developed the expected utility theory, which predicts that people are always aiming at earning as much money as they can. They therefore think that people are economic agents which make decisions in line with specific game theoretic rules. But is this really the case? Dania Kahneman, a behavioral economist, showed with the prospect theory, that, depending on context, people react differently to losses and gains. You may, for instance, feel more angry about losing than feeling happy about winning 10 pound in economics, this behavior is deemed irrational. Behavioral economics research showed that we are not acting like economic agents, and is trying to find out why people are often predictably making irrational decisions with neuroscience techniques such as fMRI.

Neuroeconomics aims to elucidate how our brains process risks and uncertainty and where their emotions influence us. Neuroscientists such as Ernst Fe and Alan sanfei study economic decision making in the brain, for instance, by using the ultimatum game. The ultimatum game is a famous social decision making experiment in economics and the social sciences, two players have to split a given sum of money. One player esteemed the proposer, and the other the responder. Their proposer offers how the money should be split between the two, the responder can either accept or reject. If accepted, the money is split as proposed. If rejected, however, neither player receives anything.