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Neuroeconomics: Why Economics Needs Brains

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  • 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
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    References listed on IDEAS

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