Neuroscience and 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.”