ABSTRACT
This chapter discusses the importance of abandoning the rational-agent utility-maximizing model by demonstrating the weaknesses and biases of the human mind. It explores the importance of intuition, emotion, and status seeking in economic behavior. Economic theory’s gravest mistake is its clinging obstinately to the fiction that the world is inhabited by a species of homo oeconomicus, although psychologists agree that this is dead wrong, that this is merely a one-dimensional caricature of real flesh and blood people. The perfectly rational homo oeconomicus is an odious assumption, because it implies that consumer protection is superfluous, thereby making it difficult for many consumers to navigate smoothly through our very complex economic system. The conventional assumption in economics is that people are rational and know what they want. Economists began to explore how the neural networks affect economic behavior and the field of neuroeconomics was born.
