The Brain as a Hierarchical Organization
AbstractWe model the brain as a multi-agent organization. Based on recent neuroscience evidence, we assume that different systems of the brain have different time-horizons and different access to information. Introducing asymmetric information as a restriction on optimal choices generates endogenous constraints in decision-making. In this game played between brain systems, we show the optimality of a self-disciplining rule of the type “work more today if you want to consume more today” and discuss its behavioral implications for the distribution of consumption over the life-cycle. We also argue that our dual-system theory provides “micro-microfoundations” for discounting and offer testable implications that depart from traditional models with no conflict and exogenous discounting. Last, we analyze a variant in which the agent has salient incentives or biased motivations. The previous rule is then replaced by a simple, non-intrusive precept of the type “consume what you want, just don’t abuse”.
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Bibliographic InfoPaper provided by Institute of Economic Policy Research (IEPR) in its series IEPR Working Papers with number 06.48.
Length: 37 pages
Date of creation: Apr 2006
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-10 (All new papers)
- NEP-CBA-2006-06-10 (Central Banking)
- NEP-CSE-2006-06-10 (Economics of Strategic Management)
- NEP-EVO-2006-06-10 (Evolutionary Economics)
- NEP-HPE-2006-06-10 (History & Philosophy of Economics)
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