Neuroeconomics: two camps gradually converging: what can economics gain from it?

Abstract

Neuroeconomics started off as a hybrid project. Two camps, behavioral economics in the scanner (BES) and Glimcher’s economics of neural activity (ENA), could be clearly distinguished. The camps disagreed not only about substantive issues but also about what neuroeconomics ultimately aims to accomplish. Recent developments suggest that the gap between the two camps is closing, however. There is a growing consensus, it seems, about the brain areas in which the final stages of individual decision-making occur and about relevant features of brain activity in these areas. BES and Glimcher’s ENA also seem to converge on the view that the neuroeconomics’ ultimate aim is to contribute to the construction of a new utility theory with stronger predictive power than standard expected utility theory. While the potential importance of an improved utility theory for economic theory cannot be denied, however, it remains to be seen whether an improved utility theory is something economic theory needs most badly or most urgently. Especially if economic theory is not ultimately interested in individual decisions, but in how aggregate behavior responds to incentives, attention should not be limited to what happens inside the skulls of individuals. What happens outside the individuals’ skulls, in the environments of individuals and in their interactions patterns, should also receive due attention.