Neuroscience and Economics

"Obviously, we’re not nearly as rational as we like to believe, which is why we binge on subprime mortgages." Jonah Lehrer on how neuroscience can improve economics.

Jonah Lehrer explains how neuroscience may help us foresee and prevent future economic bubbles by coming to terms with our irrational processes: "I think neuroscience can help replace that deeply imperfect model of [rational] human decision-making—we don’t think like Homo Economicus—with a more realistic version, which might even help us predict the next bubble before it’s too late. (As one neuroeconomist told me, 'All the fancy experiments come down to this: Why do people do such stupid stuff?') ... In recent years, neuroscientists also have become interested in bubbles, if only because the financial manias seem to take advantage of deep-seated human flaws; the market fails only because the brain fails first."