Robert Shiller on neuroeconomics….

From yesterday’s NYT, here. This year’s Nobel laureate in economics is of the firm opinion that the field of neuroeconomics is going to become increasingly important because humans do not behave rationally. I agree with the basic point but I would add two things: first, at least in the US (probably less so in China) fMRI studies are often statistically underpowered. I think this is generally a challenge for all of behavioral economics. Second, in real economic ecosystems (with millions of human agents) complexity plays an important role in emergents (such as market prices for goods). To capture these complex adaptive systems we really need the tools of computational social science and especially the tools of agent-based models. These models have the strength of accommodating millions of agents (in silico) and potentially provide insights and predictive power to the above types of emergents.