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Understanding the Brain's Systems in Microeconomics Decision Making

Explore how the brain's Automatic and Reflective Systems impact decision-making in economics. Discover the role of intuition versus rationality in shaping choices and implications for well-being. Learn how Nudge aims to optimize decision-making processes for better outcomes.

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Understanding the Brain's Systems in Microeconomics Decision Making

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  1. Nudge:Automatic and Reflective Systems Microeconomics 5111 January 13, 2009 Presentation by: Marissa Bender and Danielle Hoegy

  2. How does the brain work? The brain makes use of two systems: the Automatic System and the Reflective System Automatic: intuitive, rapid, instinctive Reflective: rational, deliberate, self- conscious

  3. - Uncontrolled - Fast - Effortless - Unconscious - Associative - Skilled Automatic System Associated with oldest parts of the brain, this system is the “lizard” within us. Developed through experience, repetition, and practice, the Automatic System allows people to respond to complex situations quickly and with accuracy.

  4. Reflective System - Controlled - Slow - Effortful - Self-aware - Deductive - Rule-following This system involves people consciously engaging in processes to make decisions or analyze situations that are “irregular” Learning a new language, learning to drive, doing complicated math problems, etc. all make use of the Reflective System.

  5. Marissa and Danielle’s A & R Test

  6. Automatic Parallel processing Sub-Symbolic Reflective Authorship Symbolic Logic Lieberman et al.

  7. Lieberman et al. Model

  8. Why is this important in economics? Humans are constantly making decisions that can have a tremendous impact on their well-being: where to attend school, which job to apply for and accept, investments, savings, etc.

  9. Why is this important in economics? In making these decisions, humans often rely on their Automatic System and do not use their Reflective System - potentially making choices that do not maximize their well-being or may actually be detrimental to their well-being.

  10. Why is this important in economics? The goal of Nudge is to help people rely on their Automatic System without getting into trouble and make their lives easier and better.

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