In recent lectures for a course in the Business School called Behavioural and Sustainable Finance, the hot topic has been human decision making. How do individuals evaluate the benefits and risks of different options, what kinds of personal traits guide us to choose certain alternatives and what larger scale systematic decision making patterns exist, are some of the questions behavioural economics and finance attempt to answer.
The approach to examine such questions has originated in psychology and revolves around comprehending different “heuristics and biases” that we humans demonstrate, by acting against a rational, economic value -maximising decision making which the more orthodox economics literature argues for.
Studying the synapse, and specifically chemical synapse this week, got us thinking about the links this neural could have with our decision making capabilities. Of course the most obvious connection is that in the first place, synapses are the basis for many of our cognitive abilities!
By a quick google search, however, we also found some interesting research on how different neurotransmitters affect our behaviour and decision making. For instance, Gaalen et al. (2006) studied how dopamine-related processes affect impulsive decision-making in rats. Their results showed that the rat’s ability to restrain from instant gratification, and therefore make a less impulsive decision, depended on the activation of their dopamine D1 receptor.
The study mentions that such understanding is important, for instance, for comprehending conditions such as ADHD or ADD. But these learnings perhaps speak also to the behaviour of larger groups and could help us understand why some people choose to make impulsive decisions on the stock market. One can therefore build interesting bridges between the two courses and topics!