The Neuroeconomics of Rational Decision Making

Abstract

Mainstream economists everywhere exhibit an 'irrational passion for dispassionate rationality.' Behavioral economists, and long-time critic of mainstream economics suggests that people in mainstrean economic models 'can think like Albert Einstein, store as much memory as IBM s Big Blue, and exercise the will power of Mahatma Gandhi,' suggesting that such a view of real world modern homo sapiens is simply wrongheaded. Indeed, Thaler and other behavioral economists and psychology have documented a variety of ways in which real-world people fall far short of mainstream economists' idealized economic actor, perfectly rational homo economicus. Behavioral economist Daniel Ariely has concluded that real-world people not only exhibit an array of decision-making frailties and biases, they are 'predictably irrational,' a position now shared by so many behavioral economists, psychologists, sociologists, and evolutionary biologists that a defense of the core rationality premise of modedrn economics is demanded.