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This is Your Brain on Economics

A cornerstone of the law and economics movement is the "rational actor" theory of human behavior -- the assumption that humans make choices based on a rational cost/benefit analysis. But that cornerstone is proving to be weaker than once thought as science reveals more information about how humans make choices, writes Kent Greenfield, professor at Boston College Law School, in a guest post at the American Constitution Society Blog. A growing body of behavioral studies show that human choices are malleable, easily manipulated and driven by emotions as much as by utility, he says.

"One of the paradigmatic 'tests' that behavioralists use is the so-called ultimatum game, where one person is given an amount of money and told to propose a split with a partner.  If the partner rejects the proposed split as too low, neither person gets any money.  The economically 'rational' thing for the partner to do is to accept any proposed split, since getting something is better than nothing.  But as it turns out, most partners reject deals they consider too unfair – they would rather get nothing than let the other person get an unfair amount."

Two recent articles go from behaviorism to physiology to further make this case. Jeffrey Rosen's March 11 New York Times Magazine piece, The Brain on the Stand, includes a description of transcranial magnetic stimulation (TMS), by which researchers are able to change participants' decisions in ultimatum games by tinkering with their prefrontal cortex. Another New York Times article, Benedict Carey's March 22 piece, Brain Injury Said to Affect Moral Changes, discusses the finding that people with damage to their prefrontal cortex make decisions that are more rational and less compassionate. All of this is good news to Greenfield, who writes:

"These findings are almost too sweet for those of us who rail against the constrained view of human nature contained in the mainstream law-and-economics literature.  Those humans who think and act like economists predict are those who suffer from brain damage, or those for whom brain damage can be temporarily simulated.  To be fully human is to act with spite, compassion, confusion, love.  Economists may not understand this, but the rest of us do."

Posted by Robert J. Ambrogi on April 3, 2007 at 03:10 PM | Permalink | Comments (0)

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