Thursday, October 12, 2006

Article in Nature: Driven to Market

Nature has a reputation for publishing academic articles of high-impact (that is, loads of people read nature so articules in nature are widely read and are more likely to be cited by other people which means that Nature becomes better ranked which means that more people buy it which means...), but also they have some nice articles that are more accessible to non specialists and that are written by freelance writers.

Yesterday I was reading one in last week's (I am always late with my issue) entitled "Driven to Market" by Jonah Lehre. The article is about a relatively new field called neuroeconomics which combines both psychology and economics. That does not seem related to the topic of this blog but what it is interesting (to me) is that one of the assumptions that is prevalent in economics and that the practitioners of neuroeconomics bring to question is that humans act guided by reason in order to maximise their own benefit. This is also one of the main assumptions in Game Theory (which is a common tool in Economics). Ironically one of the criticisms that opponents of evolutionary game theory have is that animals are not rational but it seems that reason is an even weaker predictor of the behaviour of humans. One nice example to illustrate that is the game called ultimatum. In this game one player is given, say, 10 euros and told that it has to share it with someone else in such a way that if any of the players is unhappy with the way the money has been split then no one gets anything. If people were rational the first player will always offer 1 euro to the second one knowing that the second one would take whatever he or she is offered since the alternative is to get nothing at all. It seems though that when this game is played by people, deals that seem to be too unfair are always rejected even if that rejection means that the money is lost.
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