Intuitive Economics From Subconscious to Conscious
Daniel Kahneman and Amos Tversky’s work highlighted the topic of behavioral economics.
The term itself was created by Richard Thaler, an American economist and professor at the University of Chicago Booth School of Business. ?In the 1980s, Thaler built on the work of the two Israeli psychologists, with whom he collaborated on a research program into heuristics and biases.?Thaler's own research focused on how psychology and economics intersect, and he discovered that human behavior has anomalies that can't be explained by standard economic theory. Many others, like
?Now, far be it for me to challenge the work of a Nobel Prize winner like Daniel Kahneman but I wonder whether there is value in diving deeper into? how cognitive processes actually work rather than just on their implications for behavioral outcomes. Yes, understanding System 1 and System 2 thinking is critical but what underpins the cognitive processing.
?More recently, various authors have introduced the notion of cognitive economics, e.g. Bernard Walliser’s? 2007 book Cognitive Economics.
?Cognitive Economics is defined as the economics of what is in people's minds and is a growing subfield of economics that focuses primarily on innovative kinds of survey data, along with lab data, to study hypothetical choices, psychometric data, and self-report data on mental contents.
Finite cognition, or the idea that human intelligence is finite and decision-making is costly, is a key theme in Cognitive Economics and has practical consequences and policy implications. ??The use of direct data on preferences and cognitive ability allows economists to capture heterogeneity across individuals, which is often assumed away in traditional economics due to data limitations.
However, this is about the cognition within economics rather than the economics of cognition. Can we dive deeper into neurocognition to determine what really drives it? What ?we call intuitive economics.
The key force in economics is money. The key forces in intuition are energy, cellular communication, memory and ?emotion.
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Energy
Energy is the critical currency of the mind-body. The goal of the mind-body is constant preservation and renewal of energy supplies because at any moment an emergency may need massive amounts of energy to survive. And survival is the key priority of the mind-body.
?The Mind-Body is constantly using energy. Whether that’s for the brain, which uses about 25% of the available energy, or for the immune system which is the energy controller, energy is constantly allotted and rationed. For example in the event of an infection, the immune system orders the brain to effectively shut down, so it has access to as much energy as possible to fight off the invader.
?Other more obvious things impact our energy levels: sleep, nutrition, physical activity, stress. It seems reasonable to hypothesize that when energy level is high, cognition is deeper and more complex. Equally, when energy levels are low, the reverse is the case, leading to more simplistic System 1 thinking and the use of “biases”.
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Cellular Communication
The complex communication between all the cells in our mind-body is incredible. Evidence now shows that some of this communication is done wirelessly and some appears to be quantum. This system is what underpins every feeling and thought and clearly is the mechanism by which we operate in every sphere of our lives.
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?Taking a feeling, bringing it into consciousness and then cognitively untangling it to appreciate its meaning, requires a lot of effective cellular communication. When that communication is not available the feeling remains just a feeling, not available for conscious construction.?
?Cognitive processing is represented by Beta brainwaves which oscillate between 13-30 cycles per second and underpin the main mental processing state. As the number of the cycles per second increases (i.e. into the twenties cps) ?the thought process becomes more creative, sometimes too much so.
?The Dean of the Institute of Psychiatry at the University of London where I did my doctoral studies, told? the story of a? famous mathematician who was admitted to the hospital for being in ?a hyper manic state. When a colleague came to visit him, the psychiatrist showed him the notebook that the patient was working on when he flipped out.
?“Oh my God,” said the mathematic visitor. “These three formulas are brilliant!! But this fourth one, makes no sense at all. That’s where he crossed the line.”
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Memory
Obviously the recall and perception of past experiences influences our thought processes. We may have a feeling that we have ‘been here before’ but cant quite identify the circumstances. Is this our imagination or our memory?? Memory often comes with emotion, which will likely be the biggest influence on how it is perceived.
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Emotion
Emotion gives context and frames our thoughts and perceptions. The ability to ascertain what the emotion really means is a key part of decision-making.
?Neuroscience has confirmed that the areas of the brain involved in the above processes are critical to understanding intuition. ?
?The balance of these various networks is a key to understanding intuition. For example, an extreme amygdala response will result in an excess of emotional responses and likely influence the delicate balance between the various components and outcome, distorting the process and the interpretation of such., i.e. the final decision.
?Over the next few weeks, we will be developing these concepts and produce? a white paper on intuitive economics, a term we have copyrighted.
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Encouraging Autonomy Combats Demoralization
4 个月Turns out humans are not rational. The thoughtful ones were weeded out a long time ago. The affective risk response system is far superior...if we still lived in caves. See some of my intro or research stuff at www.prehabmapp.com.
Awakening Great Spirits in Others
4 个月Thanks Howard, this is really interesting. The interaction of the conscious and the subconscious mind has always been of great interest to me and these explanations have enhanced that. .
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4 个月The early guys were right about heuristics and bias. David Ropeik calls it the risk response system. This is literally where fear comes from. Could this highly evolved system indicate and intervene on addiction? If the risk response factors are organized around what we already know, the answer is yes, quite effectively. See prehabmapp.com. I'm in Sun City. Let's get lunch.
CEO at Funding Master Projects Limited
4 个月Thank you Howard. This is an area that interests me greatly. I did my PhD on the subject of social enterprises, their activities and the rationale and motivations behind them. I actually did my thesis in economic geography rather than in economics which in hindsight was fortunate (I could not find a superviser in econonics department but was lucky to find an economic geographer interested in my subject). The limitations in the neoclassic model, especially when it comes to why people engage in economic activity rather than assuming that the only rationale is profit making, is quite limiting. I found areas such as the institutional theory and economic sociology intersting but also limited. Finding a conprehensive explanation for economic activity is a way off but this may well be an important building block if it flourishes. I will follow with interest.