Thursday, September 03, 2009
Had a lecture on neuroeconomics today and I must say that while it is interesting, I feel sorry for the economists and neuroscientists who had to sit in labs and look at monitors and scans to study the brain so that my lecturer can conclude that nothing conclusive can be drawn from it yet. So instead of wasting my time listening to something that is for now inconclusive, I found myself wandering into another field on economics, and my conclusion?
Welfare Economics.
This field of economics aims to measure the welfare generated or loss from decisions made by firms, individuals and the government. The theory, as do most theories, aims to explain the decision making process based on welfare. So here's a thought.
Rationality of the individual is an assumption commonly made in many economic theories. If we know from welfare economics that a certain action will increase the welfare of an individual, but we observe that the individual does not take that course of action, then theory will tell us that welfare is not maximised. But the assumption of rationality is that the rational individual will seek to maximise welfare. Therefore, does this mean that the individual is no longer rational, or was he making a rational decision, but will live to regret it later.
Can the rational individual be regretful? Of course this begs the question of what is rational, but that is a thought for another day. So much for inconclusiveness right? Maybe this is how all these weird studies begin in the first place.
Dan
4:26 pm
