Herbert Simon Meets Social Neuroscience: The Role of Emotions in Economic Decisions
When the leading economic journals occasionally publish pieces on the role of emotions in decision making, emotions are usually treated (with Loewenstein being a major exception) as mal-adaptations that constrain optimal decisions. Another way in which emotions feature in economic analyses is as non-pecuniary costs (to be avoided) or benefits (to be sought). For instance, we may choose to cross the street (a costly behavior) to avoid coming face to face with a beggar whose visible misery would induce the unpleasant feeling of guilt and thereby subtract from our pleasure. The only relevant aspect of the emotions in this case becomes their valence—their ability to generate subjective pleasure and pain (Elster, 1998). By ignoring the evolutionarily adaptive function of emotions, economists effectively ignore what makes us “ecologically” rational—a pre-requisite to our survival as a species. Herbert Simon recognized that for us to develop anything like a complete theory of human rationality, we have to understand what role emotion plays in it. In this paper, I will build on Simon’s original insight and attempt to corroborate his wisdom with the compelling experimental evidence coming out of fields such as evolutionary psychology and social neuroscience. I will, finally, offer a meaningful framework within which we can appreciate the role that emotions play in our economic decisions.
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Keywords: evolution, emotions, neuroscience, Simon, bounded rationality