IDEAS home Printed from https://ideas.repec.org/a/bla/scandj/v106y2004i3p555-579.html
   My bibliography  Save this article

Neuroeconomics: Why Economics Needs Brains

Author

Listed:
  • Colin F. Camerer
  • George Loewenstein
  • Drazen Prelec

Abstract

Neuroeconomics uses knowledge about brain mechanisms to inform economic theory. It opens up the “black box” of the brain, much as organizational economics opened up the theory of the firm. Neuroscientists use many tools—including brain imaging, behavior of patients with brain damage, animal behavior and recording single neuron activity. The key insight for economics is that the brain is composed of multiple systems which interact. Controlled systems (“executive function”) interrupt automatic ones. Brain evidence complicates standard assumptions about basic preference, to include homeostasis and other kinds of state‐dependence, and shows emotional activation in ambiguous choice and strategic interaction.

Suggested Citation

  • Colin F. Camerer & George Loewenstein & Drazen Prelec, 2004. "Neuroeconomics: Why Economics Needs Brains," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 555-579, October.
    • Handle: RePEc:bla:scandj:v:106:y:2004:i:3:p:555-579
    DOI: 10.1111/j.0347-0520.2004.00377.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.0347-0520.2004.00377.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.0347-0520.2004.00377.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
    2. Paul M. Romer, 2000. "Thinking and Feeling," American Economic Review, American Economic Association, vol. 90(2), pages 439-443, May.
    3. Kagel,John H. & Battalio,Raymond C. & Green,Leonard, 2007. "Economic Choice Theory," Cambridge Books, Cambridge University Press, number 9780521035927.
    4. Conlin, Michael & Lynn, Michael & O'Donoghue, Ted, 2003. "The norm of restaurant tipping," Journal of Economic Behavior & Organization, Elsevier, vol. 52(3), pages 297-321, November.
    5. John F. Y. Brookfield, 2001. "Predicting the future," Nature, Nature, vol. 411(6841), pages 999-999, June.
    6. Jacob Viner, 1925. "The Utility Concept in Value Theory and Its Critics," Journal of Political Economy, University of Chicago Press, vol. 33, pages 369-369.
    7. Drazen Prelec & George Loewenstein, 1998. "The Red and the Black: Mental Accounting of Savings and Debt," Marketing Science, INFORMS, vol. 17(1), pages 4-28.
    8. Dan Ariely & George Loewenstein & Drazen Prelec, 2003. ""Coherent Arbitrariness": Stable Demand Curves Without Stable Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 73-106.
    9. Jacob Viner, 1925. "The Utility Concept in Value Theory and Its Critics," Journal of Political Economy, University of Chicago Press, vol. 33, pages 638-638.
    10. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    11. Raymond Battalio & Leonard Green & John Kagel, 1995. "Economic choice theory. an experimental analysis of animal behavior," Framed Field Experiments 00166, The Field Experiments Website.
    12. Loewenstein, George, 1996. "Out of Control: Visceral Influences on Behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(3), pages 272-292, March.
    13. Klaus Wertenbroch, 1998. "Consumption Self-Control by Rationing Purchase Quantities of Virtue and Vice," Marketing Science, INFORMS, vol. 17(4), pages 317-337.
    14. Drazen Prelec, 1998. "The Probability Weighting Function," Econometrica, Econometric Society, vol. 66(3), pages 497-528, May.
    15. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August.
    16. Johnson, Eric J. & Camerer, Colin & Sen, Sankar & Rymon, Talia, 2002. "Detecting Failures of Backward Induction: Monitoring Information Search in Sequential Bargaining," Journal of Economic Theory, Elsevier, vol. 104(1), pages 16-47, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Katharina Dowling & Daniel Guhl & Daniel Klapper & Martin Spann & Lucas Stich & Narine Yegoryan, 2020. "Behavioral biases in marketing," Journal of the Academy of Marketing Science, Springer, vol. 48(3), pages 449-477, May.
    2. repec:cup:judgdm:v:16:y:2021:i:6:p:1324-1369 is not listed on IDEAS
    3. George Loewenstein, 2000. "Emotions in Economic Theory and Economic Behavior," American Economic Review, American Economic Association, vol. 90(2), pages 426-432, May.
    4. Edward L. Glaeser, 2004. "Psychology and the Market," American Economic Review, American Economic Association, vol. 94(2), pages 408-413, May.
    5. Sudeep Bhatia & Graham Loomes & Daniel Read, 2021. "Establishing the laws of preferential choice behavior," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 16(6), pages 1324-1369, November.
    6. Rudy E. Vuchinich & Cathy A. Simpson, 1998. "Delayed Reward Discounting in Alcohol Abuse," NBER Working Papers 6410, National Bureau of Economic Research, Inc.
    7. Elisabeth Gsottbauer & Jeroen Bergh, 2011. "Environmental Policy Theory Given Bounded Rationality and Other-regarding Preferences," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(2), pages 263-304, June.
    8. Emmanuel PETIT, 2010. "The role of regret in the persistence of anomalies in financial markets (In French)," Cahiers du GREThA (2007-2019) 2010-07, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    9. Sanjit Dhami & Narges Hajimoladarvish, 2020. "Mental Accounting, Loss Aversion, and Tax Evasion: Theory and Evidence," CESifo Working Paper Series 8606, CESifo.
    10. Bruno S. Frey & Matthias Benz, 2004. "From Imperialism to Inspiration: A Survey of Economics and Psychology," Chapters, in: John B. Davis & Alain Marciano & Jochen Runde (ed.), The Elgar Companion To Economics and Philosophy, chapter 4, Edward Elgar Publishing.
    11. Jeffrey K. Sarbaum & Solomon W. Polachek & Norman E. Spear, 1999. "The Effects of Price Changes on Alcohol Consumption in Alcohol-Experienced Rats," NBER Chapters, in: The Economic Analysis of Substance Use and Abuse: An Integration of Econometric and Behavioral Economic Research, pages 75-102, National Bureau of Economic Research, Inc.
    12. Daniel Burghart & Paul Glimcher & Stephanie Lazzaro, 2013. "An expected utility maximizer walks into a bar..," Journal of Risk and Uncertainty, Springer, vol. 46(3), pages 215-246, June.
    13. Jacobs Martin, 2016. "Accounting for Changing Tastes: Approaches to Explaining Unstable Individual Preferences," Review of Economics, De Gruyter, vol. 67(2), pages 121-183, August.
    14. Milkman, Katherine L. & Beshears, John, 2009. "Mental accounting and small windfalls: Evidence from an online grocer," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 384-394, August.
    15. repec:cup:judgdm:v:2:y:2007:i::p:234-242 is not listed on IDEAS
    16. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 3, pages 229-330, Elsevier.
    17. George Loewenstein & Ted O'Donoghue & Matthew Rabin, 2003. "Projection Bias in Predicting Future Utility," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1209-1248.
    18. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
    19. Colin Camerer, 1998. "Bounded Rationality in Individual Decision Making," Experimental Economics, Springer;Economic Science Association, vol. 1(2), pages 163-183, September.
    20. Ronald Bosman & Matthias Sutter & Frans van Winden, 2000. "Emotional Hazard and Real Effort in a Power-to-Take Game," Tinbergen Institute Discussion Papers 00-106/1, Tinbergen Institute.
    21. Benjamin Hermalin & Alice Isen, 2008. "A model of the effect of affect on economic decision making," Quantitative Marketing and Economics (QME), Springer, vol. 6(1), pages 17-40, March.
    22. M. Keith Chen & Venkat Lakshminarayanan & Laurie Santos, 2005. "The Evolution of Our Preferences: Evidence from Capuchin-Monkey Trading Behavior," Cowles Foundation Discussion Papers 1524, Cowles Foundation for Research in Economics, Yale University.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:scandj:v:106:y:2004:i:3:p:555-579. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.