What is neuroeconomics?
The new field of neuroeconomics looks at how economic decision-making actually happens inside the brain. Jonathan Cohen, co-director of the Princeton Neuroscience Institute at Princeton University, describes insights that are emerging from the collaborative work of neuroscientists, psychologists, and economists.
Neuroeconomics tries to bridge the disciplines of neuroscience, psychology, and economics. I think of economics and psychology as really, in some sense, one discipline. I know that that’s a strident statement to make, but they really are siblings separated at birth. Psychology and economics are complementary disciplines, in many cases studying the same phenomena: decision making, value-based judgment, heuristics. One side approaches it from a phenomenological, experiment-driven perspective and the other from an abstract, theoretical perspective.
Psychologists, with exceptions, have pretty much been empiricists. Human behavior is complicated. We might have a theory but don’t have enough data to test it. Any theory would make many assumptions but we don’t know which ones are valid. So, the discipline, at least over much of its life, has focused largely on collecting data, deferring the development of formal theory. Economists did the opposite. It’s all about theory. The experimental approach of behavioral economics is a relatively recent innovation.