373 | Colin Camerer on the Neuroscience of Economic Thinking

This episode is sponsored by Amazon. This November is Movember, and for the fourth year running, Amazon is supporting the Movember Foundation, the world's leading men's health organization, to raise awareness for men's health. Here's how you can help. For every product sold in November from the eligible selection on Amazon.com, up to$2 is donated to Movember. So stock up on your grooming essentials from Amazon's Movember selection, including favorites like Dove Men Plus Care and Phillips Nurelco, plus Wall, Gillette, Oldspice, Brawn, Rogaine, Panasonic, and Harry's. Look your best and support men's health while you're at it, so visit Amazon.com slash Movember. For every eligible product sold in November up to two dollars is donated to the Movember Foundation to support men's health. Hello, everyone, welcome to the Mindscape Podcast. I'm your host, Sean Carroll. In physics, you know, we have this distinction between fundamental physics and all the rest of physics. Fundamental physics is the stuff deep down the quantum field theory, the general relativity, or perhaps even the string theory or whatever, whereas all the rest is the emergent levels of the world, whether it's

Condensed matter physics or geophysics or biophysics or what have you. The analogous distinction in economics is between microeconomics and macroeconomics. When you think about the inflation rate or unemployment or the manufacturing sector or finance. You're thinking about macroeconomics. Microeconomics is the foundational part of the field that asks in very general terms how people go through the day making economic decisions.

It's really about how people decide more generally to do one thing rather than another, simply indexed by spending money or something like that. So of course this question is of how people go about making decisions is a tough one. So there's a big debate about the foundations of economics, just as there's big debates about the foundations of physics, for that matter. For a long time, the simplest thing to do was to simply imagine that people were perfectly rational, more or less. No one ever thought that, right? No one ever actually thought, going back to Adam Smith, that people were perfectly rational all the time. But there's a simple assumption you can start making. Imagine that people have preferences and there's some probabilities and they have a utility function, and then you can Derive consequences for that for economic behavior.

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