Rationality and Economics

Rationality and Economics

Two Brains Running
Published: November 25, 2011
In the conflict between intuitive and rational decision-making, which side wins?

One Response

  1. The modern economics has traditionally portrayed human being as a perfectly rational and self-centered individual, so called “Homo economicus”. This notion, however, has been challenged by an increasing number of economists like Armin Falk from Bonn University who emphasize the importance of fairness and trust to human behavior. Falk in his research used M.R.I. to measure the reactions of brain when a person gets underpaid compared to his/ her identically tasked peer. In a different study, Falk together with economist Michael Kosfeld measured the heart rate variability of the tested subjects to see the physical impact of this unfair pay. Both studies have shown that fairness truly matters to people. Supportive to this claim is also a study by economist Alan Krueger who took a close look at the strike at Bridgestone/Firestone’s tire manufacturing plant in Illinois in the mid-1990s.

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