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19 - Neuroeconomics: Using Neuroscience to Make Economic Predictions

Published online by Cambridge University Press:  05 June 2012

Daniel M. Hausman
By
Colin F. Camerer
Daniel M. Hausman
Affiliation:
University of Wisconsin, Madison
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Summary

Colin F. Camerer (1959–) was educated at Johns Hopkins and the University of Chicago and since 1994 has been a professor of economics at the California Institute of Technology. Camerer's research lies at the boundaries between cognitive psychology, neurophysiology, and economics. He is deeply involved in experimental economics, and his book, Behavioral Game Theory, is the most comprehensive recent survey of experimentation in economics.

Neuroeconomics seeks to ground economic theory in detailed neural mechanisms which are expressed mathematically and make behavioural predictions. One finding is that simple kinds of economising for life-and-death decisions (food, sex and danger) do occur in the brain as rational theories assume. Another set of findings appears to support the neural basis of constructs posited in behavioural economics, such as a preference for immediacy and nonlinear weighting of small and large probabilities. A third direction shows how understanding neural circuitry permits predictions and causal experiments which show state-dependence of revealed preference – except that states are biological and neural variables.

Neuroeconomics seeks to ground microeconomic theory in details about how the brain works (Zak, 2004; Camerer et al., 2004; Chorvat and McCabe, 2005; Sanfey et al., 2006). Neuroeconomics is a subfield of behavioural economics-behavioural economics which uses empirical evidence of limits on computation, willpower and greed to inspire new theories; see Mullainathan and Thaler, (2000); Camerer, (2005). It is also a subfield of experimental economics because neuroeconomics requires mastery of difficult experimental tools which are new to economists (discussed in further detail in Section 1 below).

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Chapter
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The Philosophy of Economics
An Anthology
 , pp. 356 - 377
Publisher: Cambridge University Press
Print publication year: 2007

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