July 30, 2013

A New York Times article reported on the emerging field of neuroeconomics, in which researchers are looking at how the brain works when it comes to financial decisions. They’re scanning the brains of people as they play games designed by experimental economists, looking for fluctuations in neurons, changes in brain chemicals, and, perhaps most elusively, meaning.

In one study researchers took images of people’s brains as they played a game that tests fairness between two people. The first player is given $10 in cash. He must then decide how much to give to a second player. If Player 2 accepts the offer, the money is shared accordingly. But if he rejects it, both players go away empty-handed.

Most people in the shoes of Player 2 refuse less than $3. Apparently, they would rather punish the Player 1 than feel cheated even though they’d be better off with something.

Other experiments show that people often end up doing the opposite of what they know to be best for them, like choosing a small reward that arrives soon as opposed to a larger reward that arrives later. The researchers

hope to quantify how much emotion goes into evaluating economic decisions.

Editor’s View: Next thing you know they’ll be working up mathematical equations to explain how bumble bees fly or why ice cream tastes especially good on a hot day.

Marketers have long understood that emotions hold the key to separating people from their money. It was in the late 1800s when matter-of-fact announcements that a certain product was available at a certain store began giving way to psychologically based advertising, linking our self worth with the brand of car we drive or clothing we wear.

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