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Neuroeconomics: The combination of neuroscience, economics, and psychology to explain behavior in decisions with an economic outcome (from bidding on EBay to trading on Wall Street). This heavily incorporates biology into the field of economics, and often relies on fMRI scanning of the brain to see what component(s) of the brain are activated, given specifically designed scenarios. A participant might answer in one manner on a paper questionnaire, but their true, instinctual reactions are supposedly captured by the fMRI machines to reveal often different answers. Behavioral Finance: Behavioral finance links behavior to financial decisions, and draws heavily upon social sciences. In fact, it is the only social science in which a Nobel prize is awarded. Economic models in the past relied on rational behavior, which doesn’t have much application to humans in the real world. Behavioral finance takes the psychology of human behavior and makes adjustments so that economic models are much more reflective of their real behaviors and motivations. |
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