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21 April 2008
Successful Intentions Newsletter
Hi ,
Are you being savaged by the bear market? Does the prospect of interest rate rises leave you in a cold sweat? Don't worry - it's all in your head!
The emerging field of Neuroeconomics is linking economic decisions to how the brain works. Here are some interesting findings:
- Money provides direct reinforcement of the same brain circuitry as a wide variety of reinforcers such as attractive faces, funny cartoons, sports cars, and drugs!
- Our brain gets a kick out of earning high returns for their own sake, and presumably feels pain with the experience of parting with it.
- This might explain why we have a preference for prepayment for certain items, even where prepayment is financially irrational. Our brain seems to be choosing to enjoy consumption and avoid the pain-of-paying.
- Decision making seems to involve two separate, yet overlapping brain systems. One is responsible for pleasure and pain (liking), and the other is for motivation (wanting). Of course we are motivated to want what we like, but this suggests it's also possible to want something that brings no pleasure!
- According to brain research we are not even consciously aware of the moment of decision, giving rise to self-deception and self-manipulation.
- Recent brain imaging reveals two processes for assessing time - an impulsive, emotional, process and a more far-sighted process guided by the prefrontal cortex. Greater relative activity in the emotional system is associated with choosing earlier rewards more often (acting impulsively). In other words we seem to make myopic (short-term) choices when under the influence of powerful drives or emotions.
- When faced with ambiguous decisions - knowing we lack information we would like to have about the odds - we feel discomfort or mild fear. Brain imaging shows that different degrees of risk and uncertainty activate different areas of the brain. Competing stimuli (e.g., some fear-inducing stimulus), may trick other parts of the brain into implementing more aversion to ambiguity, such as pricing an ambiguous decision.
Find out more about Neuroeconomics and the practical applications for your own decision making at the next Coaching for Wisdom two-day workshop at Melbourne Business School's Sydney Campus, Jones bay Wharf, Pyrmont on June 18 - 19, 2008. Download the full brochure here for more information and registration details. Or download just the registration page of the brochure here.
Keep your intentions clear,
Peter Webb
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