Scientists, psychologists and economists are working together these days to study and promote a new economic theory called “Neuroeconomics.” Neuroeconomics combines neuroscience, economics and psychology to study how we make financial choices. It looks at the role of the brain when we evaluate decisions, categorize risks and rewards and interact with each other.
Britney Spears is a prime candidate for the study of neuroeconomics. After all, wouldn’t you like to know what is going on “in her brain” as she is making the decision to put her children at risk, her career at risk and her life at risk? It’s easy for us to sit back and say, “I would never do that. If I had what Britney has, I would be set for life.”
The Neuroeconomists are discovering something different however. They are discovering how our brain acts independently at times. How our brains can make seemingly “irrational” choices as compared to the risks or rewards before us. And how our brains produce certain chemicals when we are emotional or traumatized that creates a false sense of risk or lack thereof.
The current state of the US economy is a reflection of what neuroscientists and neuroeconomists are discovering. Right now people are asking, “Who in their right mind would have bought a house in the past 3 years when property values were skyrocketing and then finance that home purchase with a negative amortization loan”? Well, hundreds of thousands of people made that decision and science is showing why…
From “Addiction and Cue-Triggered Decision Processes”
By B. DOUGLAS BERNHEIM AND ANTONIO RANGEL
“Research indicates that addictive substances systematically interfere with the proper operation of an important process which the brain uses to forecast near-term hedonic rewards (pleasure), and this leads to strong, misguided, cue-triggered impulses that often defeat higher cognitive control. As a matter of formal mathematics, our model is tractable and involves a small departure from the standard framework. It generates a plausible mapping from the characteristics of the user, substance, and environment to dynamic behavior. It accounts for a number of important patterns associated with addiction, gives rise to a clear welfare standard, and has novel implications for public policy.”
“It is natural to wonder whether the model applies not just to addictive substances, but also to other problematic behaviors such as overeating or compulsive shopping. These questions are currently the subject of study among neuro-scientists and psychologists… Notably, people who suffer from pathological gambling, overeating, compulsive shopping, and kleptomania describe their experience as involving strong and often overwhelming cravings, they respond to cues such as stress and advertisements, and they exhibit cycles of binges and abstention.”
Our economic choices are not predominantly rational, they are emotional. That’s why we have swings in markets, almost as if collectively as a society we are manic depressive; sky high one day and down in the dumps the next.
So give Britney a break. Believe it or not she is making the same choices millions of other people would be making in the same situation. Her brain isn’t functioning rationally because she lives in an irrational world. Money pouring in (and out), paparazzi everywhere, pressure from her parents and managers, criticism from the public, the loss of her marriage.
How would you be “acting” in those circumstances? Are you sure?
That’s a transition John Alexandrov made and he’s sharing the secrets of how he did it everyday. His website was created to help you learn how to achieve financial and personal success just as he has. You can start learning today at www.themoneychi.com.
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