Woodford’s neuroeconomics

This post by John Cochrane points to a lot of neat papers.  I imagine the Gorton and Ordonez paper will get the most attention (eg Noah Smith’s tweet) – Gorton’s view of what happened during the global financial crisis is compelling, and his ‘bank run in the shadow banking system’ thesis is what I use to understand the GFC.

But there is a Woodford paper about neuroeconomics there, one that is related to the quote we had up for today’s ‘discussion tuesday‘.  The paper can be found here.

I had no idea that Woodford did neuroeconomic models of discrete choice – this is an area I’m ridiculously interested in.  I have his “interest and prices” sitting next to me, and it is a very good monetary economics book, but neuroeconomics is a whole other field!  Did anyone else know this?  Does anyone else have any extra literature I should take a look at?  I certainly know what I’ll be reading before bed tonight!

Neuroeconomics is exciting, and scary

Great article from Shiller on neuroeconomics.  The more justification, and more positive side, of neuroeconomics is mentioned here:

Under Samuelson’s guidance, generations of economists have based their research not on any physical structure underlying thought and behavior, but only on the assumption of rationality.

As a result, Glimcher is skeptical of prevailing economic theory, and is seeking a physical basis for it in the brain. He wants to transform “soft” utility theory into “hard” utility theory by discovering the brain mechanisms that underlie it.

This is cool.  Economists want to be reductionist, but we were unable to boil down our theory quite far enough and had to settle on some underlying assumptions of human nature – assumption that were based on “conducting experiments in our own heads”.  Neuroeconomics provides a route for us to actually push the ontological envelope and create a more objective, mechanistic, way to describe the underlying elements of human action.

However, the risk is that we allow this view to cloud our thinking on choice – no matter how far neuroeconomics evolves we will never clearly decipher whether actions are the result of determinism or free will.  By describing action in a deterministic way, we may treat human action as “too deterministic”, leading to a bias towards excessive control and meddling.

Neuroscience, determinism, and free will

The title sounds serious, but I am (sadly) not capable of steering into too much detail in this subject matter.  However, given that I have a rising interest in neuroeconomics I felt I should type something out about this quote (ht Andrew Sullivan):

Dualists about the mind and brain – those who hold that there are thinking substances like souls in the world as well as all the ordinary physical stuff – say that the mind sees and thinks and wants and calculates. Contemporary neuroscience dismisses this as crude, but Hacker argues that it just ends up swapping the mind with the brain, saying that the brain sees and thinks and wants and calculates. He says, “Merely replacing Cartesian ethereal stuff with glutinous grey matter and leaving everything else the same will not solve any problems. On the current neuroscientist’s view, it’s the brain that thinks and reasons and calculates and believes and fears and hopes. In fact, it’s human beings who do all these things, not their brains and not their minds. I don’t think it makes any sense to talk about the brain engaging in psychological or mental operations.”

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