Today's NYTimes piece, Brain Experts Now Follow the Money, highlights the growing enthusiasm for the emerging discipline of neuroeconomics.  So why is neuroeconomics so exciting?

Economics, at its core, sees human behavior as the outcome of a rational process of decision-making, wherein individuals weigh the costs and benefits of actions to maximize utility (i.e. happiness, profit).  But as economists and the rest of us know, human behavior is not this simple.  Instead outcomes are the product of an unstable and unrational complex of reflex actions, impulses, instincts, habits, customs, fashions and hysteria.

Since utility could not be measured objectively concepts like expected utility were devised to give economists an easy way to avoid the messy reality of human psychology.  Economists then spent decades developing mathematical techniques to make economic predictions without having to measure thoughts or feelings directly. 

Neureconomics is about to flip this age-old problem on its head.  Today neuroeconomists are on the verge of being able to measure expected utility from the actual actions of an individual's neurons in a person's brain.  No longer technologically constrained -- brain scanning technologies and clever experimental designs promise to transform economics into a science where one can develop theories that actually predict the neural correlations occuring in one's brain.   

For four days over this past weekend, leading neuroeconomists Paul Glimcher, Paul Zak, David Heeger, Kevin McCabe, and Vernon Smith converged at the Gruter Institute's annual meeting to discuss and show data that the brain employs a formal representation of relative expected utility for decision making and that this formal representation is computed as the product of utility.

Building upon the ground breaking work of Daniel Kahneman and Vernon Smith who received the 2002 Nobel Prize in Economics, neuroeconomics is just getting started but should eventually provide us with unprecedented understanding of how Homo economicus actually makes decisions. 

For more insight, see Paul Glimcher's new book -- Decisions, Uncertainty, and the Brain: The Science of Neuroeconomics