Reconciling the Formal and the Causal: The Role of the Neuroeconomy

Benoit Hardy-Vallee and Benoit Dubreuil

Abstract

Rational choice theory (RCT) is standardly interpreted not as a causal theory, but as a normative one. Experimental economics, by replacing underlying assumptions of the standard interpretation of RCT by more realistic ones – by including pro-social preferences to the utility function, for instance – has improved the predictability of the RCT. That was not sufficient, however, to overcome another theoretical difficulty that RCT faces, which is the fact that its postulated entities are not rooted in any causal mechanism. In this paper, we show how neuroeconomics, because it is not limited to behavioral manifestations, may pave the way to the development of a natural science of decision-making.

JEL Classification: A12, B13, C79, D01, D87

Keywords

  • rational choice theory
  • neuroeconomics
  • experimental economics
  • ultimatum game