On how modern findings in neuroscience are changing the way of understanding the economic decision-making process.
It seems strange to start an article on economics by arguing that human beings rarely act fully rationally and efficiently when making economic decisions. However, modern advances in neurosciences indicate this: human decisions related to consumption, investment, saving, among others, are not based solely on reason, but they tend to come into play, quite strongly, more uncontrollable elements such as feelings or intuitions.
For example: how many times have we gone to the center, or to one of the two shopping malls in our province, to buy a garment that we desperately needed and have we returned home with half a dozen more that we "saw on the road"? And what to say about super / hypermarkets, especially men, when our mothers or wives "send us" for a certain order and we return with a few "extra little things", especially when they just deposit our salary.
Or to continue with the case of men, how many products have we bought just because a "pretty saleswoman" offered it to us and convinced us with her smile, without even giving us the opportunity to compare other brands, other shops, anyway… other alternatives. That is to say, and speaking more generally, it happens to all of us from time to time the fact of buying more than we really need, and that we live in an underdeveloped country like Argentina, let alone then of developed countries, where chronically you consume more than you need, especially in the US.
But it happens that these human "fragilities" (that is, the departure from full rationality when making economic decisions) are absolutely unpredictable and, until now, little taken into account when analyzing and modeling economic processes. However, in recent years, neuroscientists and "open minded" economists around the world are focusing their research precisely on the interaction of the rational brain with the emotional brain when people make decisions related to scarcity and money, giving rise to a new field of study called Neuroeconomics.
In other words, by Neuroeconomics, we understand all those efforts to try to elucidate the true mechanisms that underlie our economic decision-making, which until now economists have almost always assumed hyper-rational. But the applications of neurosciences are not limited to the science of economists exclusively, they also already exist as specific branches of study, although also embryonic, Neuromarketing, Neuromanagement, Neuroeducation, etc.
In short, it seems that neurosciences are going to make important contributions, in the coming years, to most of the social sciences; in fact, the seeds for change are already scattered, and today thanks to neuroimaging (mainly magnetic resonance imaging), the human brain can be analyzed at the very moment it is making decisions, and with a high degree of detail. And it doesn't take a futurologist to predict that, sooner or later, economists will have to at least get acquainted with these issues. That is, the change will come, that is inevitable. What nobody knows is how deep it will be.
The dominant thinking in economics today indicates that human beings try to minimize the expenditure of their scarce resources (their money, their working time, etc.) in order to maximize the needs that they satisfy from them. That is, from Adam Smith onwards, and especially with the neoclassicals (Jevons, Walras, etc.), human beings have been assumed as highly rational subjects, who absorb all the available information and transform it into decisions of the highest quality., ultra-maximizing and who are also people smart enough to learn from their mistakes (human deviations from extreme rationality) and never make them again. This discourse on economic theory still has many adherents today.
However, neurosciences, thanks to neuroimaging applied to people in specific situations, are showing, for example, that:
- Consumer decision making is not a rational process. That is, customers do not consciously examine the attributes of a product or service to purchase it.In most cases, the purchasing process is relatively automatic and stems from habits and other metaconscious forces, among which history itself gravitate, personality, neurophysiological characteristics and the physical and social context that surrounds us. According to scientists, the areas of the brain of rationality cannot function in isolation from the areas of biological-emotional regulation. The two systems communicate and affect behavior together, and consequently, the behavior of people. Furthermore, the emotional system (the oldest area of the brain) is the first force that acts on mental processes,therefore it determines the direction of decisions. The fragrance of a perfume, for example, can evoke different sensations. If the customer associates it with painful experiences or with a person with whom they do not sympathize, it is very likely that they will not buy it, even if the price-quality-brand ratio is reasonable These and other associations, as well as most of Mental processes are verified in the metaconscious plane and force us to find new tools that allow us to access that disordered set of emotions, memories, thoughts and perceptions that determine purchase and consumption decisions, and that most of the time the client unknown.If the customer associates it with painful experiences or with a person with whom they do not sympathize, it is very likely that they will not buy it, even if the price-quality-brand ratio is reasonable These and other associations, as well as most of Mental processes are verified in the metaconscious plane and force us to find new tools that allow us to access that disordered set of emotions, memories, thoughts and perceptions that determine purchase and consumption decisions, and that most of the time the client unknown.If the customer associates it with painful experiences or with a person with whom they do not sympathize, it is very likely that they will not buy it, even if the price-quality-brand ratio is reasonable These and other associations, as well as most of Mental processes are verified in the metaconscious plane and force us to find new tools that allow us to access that disordered set of emotions, memories, thoughts and perceptions that determine purchase and consumption decisions, and that most of the time the client unknown.They are verified on the metaconscious plane and force us to find new tools that allow us to access that disordered set of emotions, memories, thoughts and perceptions that determine purchase and consumption decisions, and that most of the time the customer is unaware.They are verified on the metaconscious plane and force us to find new tools that allow us to access that disordered set of emotions, memories, thoughts and perceptions that determine purchase and consumption decisions, and that most of the time the customer is unaware.
These ideas, coming from Neuromarketing, but fully applicable to the theory of demand in microeconomics, are just a sample of how far we human beings are from full rationality in decision-making, and as a consequence, also from econo-mathematical models that we economists use.
The creative question of Neuroeconomics is going to be given by the way in which it incorporates other variables to the models, especially emotional ones, which allow describing “more human” consumers, and not simple “cost-benefit calculators”. The challenge is great, but the enormous anomalies in traditional theory today are worth the effort.
The future will tell if Neuroeconomics contributed important things or was just a passing fad; then, we will have to wait a few years to draw definitive conclusions.
