Why your brain is the next frontier in economics

12 June 2014

Professor Paul W. Glimcher from New York University is perhaps the world's leading expert on the neurobiology and economics of human decision-making, and he will be presenting his groundbreaking research at a special Sydney Ideas event on Friday 13th June.

Whether choosing a dinner, a spouse or an investment, experts now know in what part of the brain our likes and dislikes are encoded, how we represent alternatives, and even how we choose.

"For centuries economists have had to try to understand and predict what we will choose, whether in the domain of consumer goods or financial assets by treating the brain as a black box," said Professor Glimcher.

"In the last two decades that has begun to change quite dramatically. We now understand the basic architecture of the brain and how it actually makes choices. This allows us to begin to open the black box and many people believe that as a result of that new ability this will be the beginning of a new era in economics."

"Neuroeconomics is one of the new frontiers of economics," agrees Dr Agnieszka Tymula, a decision-scientist from the School of Economics.

"It promises breakthroughs in economics by utilizing our understanding of the brain," she said.

One of these breakthroughs is a new understanding of what is often called the 'curse of choice'.

"We have known for a decade or so that people have trouble making efficient choices when they face more than just a few options," said Professor Glimcher. "Trying to choose the best option from a set of 12 different cars, or breakfast cereals, is notoriously difficult."

"But it looks like we now understand exactly what feature of the brain causes errors in these situations and we can even - knowing how that feature works mechanically - prescribe different ways to choose that play to the strengths, rather than the weaknesses, of our brainarchitecture."

Another benefit is an understanding of how our brains change with age.

"Because we have learned from neuroscience how the brain ages we are able to use these insights to understand how decision-making changes over the lifespan," said Dr Tymula.

This area of neurobiology was reflected in a study by Dr Tymula into how ageing negatively impacts rational decision-making, and is of particular importance to the School of Economics new ARC-funded Centre of Excellence, led by Professor Colm Harmon.

"Its particularly exciting to be in Australia, and at The University of Sydney, right now because the Australian economics community is really beginning to embrace these 'Neuroeconomic' approaches," said Professor Glimcher.

"Last year the University of Sydney hired its first neuroeconomist (Dr Agnieszka Tymula) and Melbourne is just now following suit (Prof Peter Bossaerts) so this exciting area is looking to become particularly vibrant in Sydney and in Australia as this hiring trend continues."

How we decide is co-presented by the School of Economics. Professor Glimcher is available for interview.

Event details:

What: How we decide: Using neuroscience and economics to understand choice

Where: Law School Lecture Theatre 101, Level 1 Sydney Law School Annex, Eastern Avenue, University of Sydney.

When: Friday 13 June, 6:00-7.30pm

Cost: Free and open to all with online registration requested.

Registration: Register online now

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