Vol. XLIII (March 2005), pp. 9–64 | COLIN CAMERER, GEORGE LOEWENSTEIN, and DRAZEN PRELEC
The chapter introduces the field of neuroeconomics, which explores how neuroscience can inform economic theory and decision-making. It highlights the shift from a century of separation between economics and psychology to the integration of insights from behavioral economics, driven by advancements in neuroscience. The chapter discusses two approaches: incremental and radical. The incremental approach adds variables to traditional economic models, while the radical approach redefines economic decision-making based on new neuroscience findings. It emphasizes the importance of understanding automatic and controlled processes, as well as affective and cognitive functions, in shaping economic behavior. The chapter also reviews various neuroscience methods, including brain imaging, single-neuron measurement, electrical brain stimulation, and psychophysiological measurements, and their implications for economics. Finally, it provides a theoretical framework that distinguishes between automatic and controlled processes, and affective and cognitive processes, to guide further research and applications in economics.The chapter introduces the field of neuroeconomics, which explores how neuroscience can inform economic theory and decision-making. It highlights the shift from a century of separation between economics and psychology to the integration of insights from behavioral economics, driven by advancements in neuroscience. The chapter discusses two approaches: incremental and radical. The incremental approach adds variables to traditional economic models, while the radical approach redefines economic decision-making based on new neuroscience findings. It emphasizes the importance of understanding automatic and controlled processes, as well as affective and cognitive functions, in shaping economic behavior. The chapter also reviews various neuroscience methods, including brain imaging, single-neuron measurement, electrical brain stimulation, and psychophysiological measurements, and their implications for economics. Finally, it provides a theoretical framework that distinguishes between automatic and controlled processes, and affective and cognitive processes, to guide further research and applications in economics.