A Brain-Focused Foundation for Economic Science : A Proposed Reconciliation Between Neoclassical and Behavioral Economics

This book argues that Lionel Robbinsâ#x80;#x99;s construction of the economics fieldâ#x80;#x99;s organizing cornerstone, scarcityâ#x80;#x94;and all that has been derived from it from economists in Robbinsâ#x80;#x99;s time to todayâ#x80;#x94;no longer can generate general consent among economists. Since Robbinsâ#x80;#x99; Essay, economists have learned more than Robbins and his cohorts could have imagined about human decision making and about the human brain that is the lynchpin of human decision making. This book argues however that behavioral economists and neuroeconomists, in pointing to numerous ways people fall short of perfectly rational decisions (anomalies, biases, and downright errors), have saved conventional economics from such self-contradictions in what could be viewed as a wayward approach. This book posits that the human brain is the ultimate scarce resource, and that a focus on the brain can bring a new foundation for economics and can save the discipline from hostile criticisms from a variety of non-economists (many psychologists) Preface 6 Contents 14 Chapter 1 Economists’ Founding Concerns in the History of Economic Thought 15 The Foundations of Economics, Scarcity, and Analytical Methods 15 The Overriding Goal of the Book 20 The Fracturing of Economics 21 Economists’ Methodologies 23 Twixt Smith and Wicksteed 30 Malthus 30 Ricardo 32 Marx 33 Bastiat 35 Bentham, Mill, and the Marginalists 35 Marshall 36 Wicksteed 41 Concluding Comments 43 References 56 Chapter 2 Lionel Robbins and Scarcity 59 Disunity in Economic Inquiries 59 Scarcity, the Unifying Theme in Economic Inquiries 61 Rebukes of Historical and Psychological Analytics 65 The Significance of Economics 70 Concluding Comments 71 References 75 Chapter 3 From Robbins to Friedman and Beyond 76 Robbins and Scarcity, Once Again 76 Fixed Rational and Purposive Behavior 77 The Human Brain as a Scarce Resource 82 Friedman’s Canonization of Robbins’ Methodology 83 Becker and Stigler 88 Opening for Criticisms 90 Predictions and Empirical Tests 91 Possible Problems with Empirical Tests 92 The Economics of Doing Science 94 The Emergence of Laboratory Economics 96 Economics as a Way of Thinking 98 Concluding Comments 99 References 103 Chapter 4 Behavioral Economics, Evolution, and the Human Brain 106 Behavioral Economics, a Brief Review 108 Consumer Choice Theory 109 Expected Utility Theory 111 Loss Aversion 112 Dominance, Invariance, and Framing 112 Mental Accounting and Framing 114 Opportunity Cost 115 Choice Inconsistencies 115 Endowment Effect 116 Acquisition and Transaction Utility 117 Sunk Costs 118 Behavioral Finance 119 The Growing Divide in Economics 120 Evolutionary Constraints on the Human Brain 127 Energy Demands of the Human Brain 128 Economic Limits of Brain Development 129 Evolved Altruism 130 Selfish Genes 131 Loss Aversion, Again 132 Gains and Losses 134 Life Expectancy and Investment 135 The Efficiency of the Human Brain 136 The Human Brain on Chess 138 Findings in Evolutionary Psychology 141 Hardwired Choice Responses and the Brain’s Efficiency 144 The Interconnectedness of Specialization and Trade and the Size and Efficiency of the Human Brain 146 Concluding Comments 147 References 156 Chapter 5 The Human Brain: The Ultimate Scarce, Efficient, and Rational Resource 163 Demands on the Human Brain 164 Limitations of the Senses 165 Small and Large Daily Decisions 165 Sensory Information Inflows and the Discovery of Decision Imperfections 166 Conscious and Subconscious Decision-Making 168 Algorithms and Heuristics as Decision-Making Relief 170 Relatively Absolute Absolutes 171 The Brain’s Structure and Decision-Making 172 The Brain’s Scarcity Problem and Economic Education 173 Brain’s Scarcity Problem and Increasing Choices 175 The Brain and Algorithms 178 Diet Cokes, Brain-Focused Economics, and Decision-Portfolio Management 186 Rationality and Habitual Choices 187 Scarcity and Brain-Focused Economics 188 Concluding Comments 193 References 195 Chapter 6 A Brain-Focused Neoclassical Microeconomics 197 The Economic Problem Recast 197 The Economics of Brain Biases and Failures 201 The Evolutionarily Constrained Human Brain and the Findings of Behaviorists 203 Predictions from a Brain-Focused Economics 206 Prediction Prospects 210 Decision Mistakes and Welfare 210 Propensities to Specialize and Trade 211 Endogenous Rationality and Welfare Improvement 211 Irrationality as a Variable 212 Technology and Rationality 214 Market Power and Rationality 214 Rationality and Neuroscience 215 Concluding Comments 216 References 218 Bibliography 219 Index 229 This book argues that Lionel Robbinsâ#x80;#x99;s construction of the economics fieldâ#x80;#x99;s organizing cornerstone, scarcityâ#x80;#x94;and all that has been derived from it from economists in Robbinsâ#x80;#x99;s time to todayâ#x80;#x94;no longer can generate general consent among economists. Since Robbinsâ#x80;#x99; Essay, economists have learned more than Robbins and his cohorts could have imagined about human decision making and about the human brain that is the lynchpin of human decision making. This book argues however that behavioral economists and neuroeconomists, in pointing to numerous ways people fall short of perfectly rational decisions (anomalies, biases, and downright errors), have saved conventional economics from such self-contradictions in what could be viewed as a wayward approach. This book posits that the human brain is the ultimate scarce resource, and that a focus on the brain can bring a new foundation for economics and can save the discipline from hostile criticisms from a variety of non-economists (many psychologists) Annotation This book argues that Lionel Robbins's construction of the economics field's organizing cornerstone, scarcity--and all that has been derived from it from economists in Robbins's time to today--no longer can generate general consent among economists. Since Robbins' Essay, economists have learned more than Robbins and his cohorts could have imagined about human decision making and about the human brain that is the lynchpin of human decision making. This book argues however that behavioral economists and neuroeconomists, in pointing to numerous ways people fall short of perfectly rational decisions (anomalies, biases, and downright errors), have saved conventional economics from such self-contradictions in what could be viewed as a wayward approach. This book posits that the human brain is the ultimate scarce resource, and that a focus on the brain can bring a new foundation for economics and can save the discipline from hostile criticisms from a variety of non-economists (many psychologists)