Where economics and neuroscience might meet

Contrary to what is claimed by Gul and Pesendorfer (2008), in this paper I argue that neuroscience and economics can meet in ways that speak to the interests of economists. As Bernheim (2009) argues, economists seem to be primarily interested in novel models that link 'traditional' environmental variables (such as prices and taxes) to choice behavior in a more accurate way than existing models. Neuroscience might be helpful here, since especially computational neuroscience is also in the business of mapping environmental variables on to behavior. Given that experimental findings seem to show that choice behavior displays great context-sensitivity, I discuss two tentative ways in which neuroscience might be helpful. Neuroscience might be able to identify a multitude of environmental variables and the choice algorithms in the brain that they activate. Going this way might lead to novel models that differ markedly from standard economic models. Alternatively, neuroscience might be able to provide more theoretical guidance as to how individuals model the situations they are in. In principle, this route might leave standard economic models largely intact while improving their predictive record.

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