Brain Function and Economic Decision Making

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This project uses functional Magnetic Resonance Imaging to investigate biologically plausible brain mechanisms that produce economic behavior. Traditionally experiments in economics have taken place either in the field, where individual behavior can be observed before and after a treatment variable has been manipulated, or in behavioral laboratories where, in addition, there is greater control over incentives, information, and the rules of the game. The purpose of such experimentation is to better understand both the behavioral mechanisms that produce particular types of behavior, such as investor overconfidence in 'bull' markets, and the resulting behavior of markets, such as price bubbles. While a great deal of progress has been made in understanding market behavior very little progress has been made in understanding individual behavior. Recent advances in functional brain imaging now makes it possible for economists and neuroscientists to collaborate to study how brain activity is linked to economic decision making. This project studies how the human brain is genetically designed, and environmentally influenced, to solve the problem of mutually advantageous cooperation. This research is likely to have a significant impact on economic thought, and institutional design, by linking observed economic behavior to the biological mechanisms that produce this behavior.