Do Economists Need Brains?

An interesting article on the development of neuronomics:

...it might be possible to move economics away from its simplified model of rational, self-interested, utility-maximising decision-making. Instead of hypothesising about Homo economicus, they could base their research on what actually goes on inside the head of Homo sapiens.

Already, neuroeconomics is giving many economists a dopamine rush. For example, Colin Camerer of the California Institute of Technology, a leading centre of research in neuroeconomics, believes that incorporating insights from neuroscience could transform economics, by providing a much better understanding of everything from people’s reactions to advertising to decisions to go on strike.

At the same time, Mr Camerer thinks economics has the potential to improve neuroscience, for instance by introducing neuroscientists to sophisticated game theory. “The neuroscientist’s idea of a game is rock, paper, scissors, which is zero-sum, whereas economists have focused on strategic games that produce gains through collaboration.” Herbert Gintis of the Sante Fe Institute has even higher hopes that breakthroughs in neuroscience will help bring about the integration of all the behavioural sciences—economics, psychology, anthropology, sociology, political science and biology relating to human and animal behaviour—around a common, brain-based model of how people take decisions.

The reason why economists in the late 19th century and much of the 20th put the rational utility-maximising individual at the heart of their models was not that they thought that economics should avoid looking into the brain, but because they lacked the technical means to do so, says Mr Colander. “Economics became a deductive science because we didn’t have the tools to gather information inductively. Now, better statistical tools and neuroscience are opening up the possibility that economics can become an abductive science that combines elements of deductive and inductive reasoning.”

I am taking a seminar in neuronomics this semester with Kevin McCabe. I hope to have more thoughts on this soon.

See my previous post on mindless economics.