It is all in your mind

Forbes this week contains an interesting article on the new field of neuroeconomics. Neuroeconomics involves economists using MRI scanners and the like to work out what ‘utility’ is really all about. Here is one example:

Traditional economics predicts that people should use money to acquire things that might make them happy. Money-in and of itself-shouldn’t make people happy. But Knutson found more primal forces at work. Offers of cash caused a surge of dopamine in a tiny piece of neural machinery called the nucleus accumbens-a structure as ancient as backbones that plays a key role in addiction. The surge wasn’t caused by a wad of cash already in people’s back pockets, but instead by the opportunity to make some easy money.

The article also reports examples on trust and on decision-making under uncertainty. Not that anyone should through away the textbooks yet but it is an interesting line of research.

On my wish list would be an examination of what causes people to reject take-it-or-leave-it offers that would leave them with less than should they accept them. This might give us an insight into the drivers of ‘fairness.’

(Thanks to MBS alumni, Joe Yap, for this reference)