Natural Rationality | decision-making in the economy of nature


Neuroeconomics in the Annual Review of Psychology

A great team of (neuro) economists/psychologists, George Loewenstein, Scott Rick and Jonathan Cohen, wrote an extensive review paper about neuroeconomics for the 2008 Annual Review of Psychology. It presents all important research papers, discusses how neuroeconomics shed light--from a psychological and economic point of view--on decision-making under risk and uncertainty, intertemporal choice, and social decision making and, finally, show how this research can contribute to psychology. It is a highly recommended paper. One important missing topic, however, is all the neuroeconomics literature about hormomes and behavior, such as Paul Zak's lab research, for instance, the study that shows that oxytocin increases trust (and generosity; see this post): players transfer more money, in the trust game, after inhaling oxytocin (an hormone involved in social cognition, fear reduction, bonding, love, etc.). Anyway, here is a short summary (from the paper):

  1. Neuroeconomics has further bridged the once disparate fields of economics and psychology, largely due to movement within economics. Change has occurred within economics because the most important findings in neuroeconomics have posed a challenge to the standard economic perspective.
  2. Neuroeconomics has primarily challenged the standard economic assumption that decision making is a unitary process—a simple matter of integrated and coherent utility maximization—suggesting instead that it is driven by the interaction between automatic and controlled processes.
  3. Neuroeconomic research has focused most intensely on decision making under risk and uncertainty, but this line of research provides only mixed support for a dual systems perspective.
  4. The extent to which intertemporal choice is generated by multiple systems with conflicting priorities is perhaps the most hotly debated issue within neuroeconomics. However, a majority of the evidence favors a multiple systems perspective.
  5. Neuroeconomic research on social preferences is highly supportive of a dual systems account, although the most prominent studies come to conflicting conclusions regarding how selfinterest and fairness concerns interact to influence behavior.
  6. Neuroeconomics may ultimately influence psychology indirectly, via its influence on economics (e.g., by inspiring economic models increasingly grounded in psychological reality), and directly, by addressing debates of interest within psychology (e.g., whether multiple systems operate sequentially or in parallel to influence behavior).

  • Loewenstein, G., Rick, S., & Cohen, J. (2008). Neuroeconomics. Annual Review of Psychology, 59(1). (published online as a Review in Advance on September 17, 2007)