“Although Plato compared the human soul to a chariot pulled by the two horses of reason and emotion, modern economics has mostly been a one-horse show,” says a recent article in the Economist. “It has been obsessed with reason.” Yet, new research is showing that isn’t always the case. New technology allowing an almost second by second scan of brain activity has spurred the development of a new field: neuroeconomics. It’s a fascinating subject.
“For example, the idea that humans compute the â€œexpected valueâ€ of future events is central to many economic models,” says the Economist. “Whether people will invest in shares or buy insurance depends on how they estimate the odds of future events weighted by the gains and losses in each case. Your pension, for example, might have a very low expected value if there is a large probability that bonds and shares will plunge just before you retire.” Yet research has shown that different parts of the brain are responsible for different types of economic decisions, particularly in short-term. And many of these are made in the same limbic systems responsible for emotion. It’s a fascinating article (many others on the subject are also starting to appear).
Speaking of Plato, I have been taking a mini-class at All Learn this weekend. If you are not familiar with it, you should check out their Web site. All Learn is a consortium of colleges (Oxford, Stanford, and Yale) that has combined their curriculum to produce some great online learning courses geared toward the general public. These are courses taught by the professors who are experts in the field. I’ve enjoyed it a great deal; I’m sure it won’t be my last class.
How does that relate to Plato? Well, we have been discussing Plato’s Republic, and the responsibility of the state or politics in matters of individual virtue. I believe my last entry dealt with the subject of democracy and that Plato believed such freedom only caused disorder; politics should mirror the natural order. And yet, we have been discussing how this might relate to Smith, and that doesn’t the “invisible hand” make a democratic system self-organizing, creating some natural order from chaos. As I said, the conversations can be just wonderful. I encourage you to check it out.