Rational, Emotional, and Neural Foundations of Economic Preferences

2016 ◽  
pp. 45-65 ◽  
Author(s):  
Harish C. Chandan
Keyword(s):  
Decision Making ◽  
Psychological Factors ◽  
Economic Behavior ◽  
Economic Decision ◽  
Classical Economics ◽  
Economic Decision Making ◽  
Self Interest ◽  
Economic Preferences ◽  
Decision Making Behavior ◽  
The Brain

Classical economics assumes human economic decision making is completely rational and dominated by self-interest. Behavior economics emerged to account for the fact that human economic preferences are often influenced by emotional and psychological factors leading to inconsistent, intransitive, and irrational decisions that fail to maximize utility and minimize cost and transcend only self-interest. Both rationality and emotions are seated in the human brain in the prefrontal cortex and limbic system, respectively. The brain imaging methods of neuroscience help in understanding the interplay between economic behavior and neural mechanisms. The human economic decision making behavior involves computational and neurobiological processes and is related to the psychological processes. Classical Economics, Psychology, and Neuroscience converge in Neuroeconomics to better understand and predict human economic decision-making. Neuromarketing is an emerging field that uses neuroscience techniques to understand economic preferences of consumers.

Rational, Emotional, and Neural Foundations of Economic Preferences

2018 ◽  
pp. 445-465
Author(s):  
Harish C. Chandan
Keyword(s):  
Decision Making ◽  
Psychological Factors ◽  
Economic Behavior ◽  
Economic Decision ◽  
Classical Economics ◽  
Economic Decision Making ◽  
Self Interest ◽  
Economic Preferences ◽  
Decision Making Behavior ◽  
The Brain

Classical economics assumes human economic decision making is completely rational and dominated by self-interest. Behavior economics emerged to account for the fact that human economic preferences are often influenced by emotional and psychological factors leading to inconsistent, intransitive, and irrational decisions that fail to maximize utility and minimize cost and transcend only self-interest. Both rationality and emotions are seated in the human brain in the prefrontal cortex and limbic system, respectively. The brain imaging methods of neuroscience help in understanding the interplay between economic behavior and neural mechanisms. The human economic decision making behavior involves computational and neurobiological processes and is related to the psychological processes. Classical Economics, Psychology, and Neuroscience converge in Neuroeconomics to better understand and predict human economic decision-making. Neuromarketing is an emerging field that uses neuroscience techniques to understand economic preferences of consumers.

scholarly journals Consequences of poverty on economic decision-making: Assessing the verisimilitude of the cognitive mechanism

2019 ◽  
Author(s):  
Matus Adamkovic
Keyword(s):  
Decision Making ◽  
Poverty Rate ◽  
Cognitive Responses ◽  
Dyadic Relationships ◽  
Economic Decision ◽  
Questionable Research Practices ◽  
Cognitive Mechanism ◽  
Long Run ◽  
Economic Decision Making ◽  
Economic Preferences

The paper aims to assess the verisimilitude of the hypothesized model of poverty perpetuation linking socioeconomic situation and economic preferences via cognitive load, executive functions, and intuitive/deliberative decision-making style. The proposed model as a whole has not found required support in data, and simultaneously, the dyadic relationships between the variables have been mainly weak. Sensitivity analysis has revealed that the majority of the observed estimates varies substantively depending on the arbitrary analytic decisions of the researcher. The findings could be primarily attributed to (1) the possibility that the nature of economic preferences resembles stable personality traits and hence the preferences are only weakly determined by cognitive dispositions or patterns of emotional/cognitive responses in a long run; (2) the high social equality and relatively low poverty rate in Slovakia, which currently allows the majority of the inhabitants to afford elementary goods and meet the basic needs, regardless of their economic situation; (3) the fact that the current state of knowledge in behavioral sciences is burdened by multiple problems (e.g., lack of good theory, complicated issue of causality, prevalence of questionable research practices, or publication bias), resulting into poor replicability and low credibility of the knowledge, implies that the theories upon which the model was built might not necessarily be true. The hypothesized cognitive mechanism does not allow to explain what economic decision-making depends on, neither why do people fall into poverty traps.

Economic Decision Making, Emotion, and Prefrontal Cortex

2016 ◽  
pp. 122-131 ◽  
Author(s):  
Salim Lahmiri
Keyword(s):  
Decision Making ◽  
Prefrontal Cortex ◽  
Brain Regions ◽  
Economic Decision ◽  
Financial Decision Making ◽  
Economic Decision Making ◽  
Formal Framework ◽  
Financial Decision ◽  
The Relationship ◽  
The Brain

How diverse regions of the brain are coordinated to produce objective-directed decision is the essence of neuroeconomics. Indeed, the latter is a formal framework to describe the involvement of numerous brain regions including frontal, cingulate, parietal cortex, and striatum in economic and financial decision-making process. The purpose of this chapter is to explain the relationship between economic decision making and emotion on one hand, and the relationship between economic decision making and prefrontal cortex on the other hand.

scholarly journals The influence of promotional activities on the economic decision making

2016 ◽  
Vol 13 (3) ◽  
pp. 4613
Author(s):  
Aslı Öztopcu ◽  
Nuran Karaağaoğlu
Keyword(s):  
Decision Making ◽  
Economic Thought ◽  
Marketing Strategies ◽  
Cognitive Factors ◽  
Rational Behavior ◽  
Social Emotional ◽  
Economic Decision ◽  
Economic Decisions ◽  
Economic Decision Making ◽  
Decision Making Behavior

Behavioral economics is one of the sub-disciplines discussed through the process of economic thought. It studies the economic decisions of the individuals under the influence of social, emotional and cognitive factors. According to the rational behavior theory in economics, it is discussed that, the individuals may show irrational behaviors in spite of the expectation of rational behaviors. Economics is a human focused social science. The studies held, illustrate that the human behaviors have to be evaluated with the psychological factors. The purpose of this study is to investigate the influence of sales efforts of the drug firms on the economic decision making. The data gathered by the questionnaire show that the marketing strategies influence the decision making behavior of individuals. 

Neuroaccounting: Consilience between the Biologically Evolved Brain and Culturally Evolved Accounting Principles

2010 ◽  
Vol 24 (2) ◽  
pp. 221-255 ◽  
Author(s):  
John Dickhaut ◽  
Sudipta Basu ◽  
Kevin McCabe ◽  
Greg Waymire
Keyword(s):  
Decision Making ◽  
Human Brain ◽  
Economic Exchange ◽  
Economic Decision ◽  
Accounting Principles ◽  
Primary Function ◽  
Economic Decision Making ◽  
Net Benefits ◽  
Brain Behavior ◽  
The Brain

SYNOPSIS: We develop the hypothesis that culturally evolved accounting principles will be ultimately explained by their consilience with how the human brain has evolved biologically to evaluate social and economic exchange. We provide background on the structure and evolution of the brain, the measurement of brain behavior during economic decision making, and the brain’s central role in building economic institutions. We describe the emergence of modern accounting principles and argue that the primary function of accounting in evaluating exchange is to provide quantified information on the net benefits of past exchanges. We review evidence documented by neuroscientists that is consistent with the hypothesis that longstanding accounting principles (e.g., Revenue Realization and Conservatism) have distinct parallels in brain behaviors. Our analysis of Neuroaccounting extends Basu and Waymire (2006) to provide a new way to scientifically view accounting, which has implications for how we think about the origins and persistence of longstanding accounting principles.

scholarly journals PROSPECTS THEORY AND INDIVIDUAL STYLE OF ECONOMIC DECISION-MAKING

2020 ◽  
Vol 14 (1) ◽  
pp. 54-63
Author(s):  
Tetiana Kononovych ◽  
Petro Myasoid
Keyword(s):  
Decision Making ◽  
Cognitive Biases ◽  
Single Case ◽  
Research Participant ◽  
Economic Behavior ◽  
Cognitive Systems ◽  
Decision Making Process ◽  
Economic Decision ◽  
Economic Decision Making

The purpose of the research was to test the prospects theory of Nobel Prize winner in economics D. Kahneman and A. Tversky, which describes the heuristics of economic decision-making, to the adoption of a decision by a concrete person. The method of the study is the Single Case Study, which is the most basic form of case-oriented research. The empirical material was obtained using the Melbourne decision-making questionnaire. The presence of cognitive biases in the decision-making process was determined based on the framing effect. Many methods were used to test the decision-making style of the research participant N and the components of intellectual-personal potential determined. It shows that there are deviations in the process of concrete economic decision making, which are not the result of heuristics, characterized by D. Kahneman and A. Tversky. The decision of the research participant is based on the rational style of this process and the analytical system of reasoning. There is an interaction between cognitive systems 1 and 2 with the evident dominance of the latter. This system blocks cognitive biases and ensures the achievement of results. At the same time, there is an influence from the properties of the intellectual-personal potential of the research participant, such as rationality, intolerance to un-certainty, emotional intelligence. In conclusion, the prospects theory explains the decision-making process in the case study, but the "systematic errors" which D. Kahneman and A. Tversky speak about are not observed. Therefore, there is an opportunity to continue studying the role of individuality in economic behavior. Keywords: behavioral economics, cognitive systems, decision-making style, prospects theory, sin-gle case study.

scholarly journals It's about Space, It's about Time, Neuroeconomics and the Brain Sublime

2011 ◽  
Vol 25 (4) ◽  
pp. 31-56 ◽  
Author(s):  
Marieke van Rooij ◽  
Guy Van Orden
Keyword(s):  
Decision Making ◽  
Brain Dynamics ◽  
Alternative View ◽  
Brain Areas ◽  
Change Over Time ◽  
Economic Decision ◽  
Economic Decision Making ◽  
Contemporary Status ◽  
The Brain ◽  
Over Time

Neuroeconomics has investigated which regions of the brain are associated with the factors contributing to economic decision making, emphasizing the position in space of brain areas associated with the factors of decision making—cognitive or emotive, rational or irrational. An alternative view of the brain has given priority to time over space, investigating the temporal patterns of brain dynamics to determine the nature of the brain's intrinsic dynamics, how its various activities change over time. These two ways of approaching the brain are contrasted in this essay to gauge the contemporary status of neuroeconomics.

Economic Decision Making, Emotion, and Prefrontal Cortex

2018 ◽  
pp. 466-476
Author(s):  
Salim Lahmiri
Keyword(s):  
Decision Making ◽  
Prefrontal Cortex ◽  
Brain Regions ◽  
Economic Decision ◽  
Financial Decision Making ◽  
Economic Decision Making ◽  
Formal Framework ◽  
Financial Decision ◽  
The Relationship ◽  
The Brain

How diverse regions of the brain are coordinated to produce objective-directed decision is the essence of neuroeconomics. Indeed, the latter is a formal framework to describe the involvement of numerous brain regions including frontal, cingulate, parietal cortex, and striatum in economic and financial decision-making process. The purpose of this chapter is to explain the relationship between economic decision making and emotion on one hand, and the relationship between economic decision making and prefrontal cortex on the other hand.

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