Neuroeconomics, Decision Making and Well-Being

Decision-making is understood as an active process inherent to the behavior of any living organism in order to guarantee its homeostasis, or well-being, through both its economy, that is, its best possible management of the resources necessary for its metabolism, or survival, and the best possible relationship with its physical and social environment, through its morals and politics, that is, its collective decisions in situations of cooperation and competition. Being able to decide is thus allowing the organism or group of organisms to seek and execute the actions that it believes will provide its desired well-being.

In organisms with motivated behavior, we observe what we understand as their decisions through the free will of self-perception, that is, their self, a condition that each individual experiences consciously as their mental and emotional state of their biological, psychological and social condition. The psychological state of a biological organism can thus be understood as its constant emotional condition in relation to the satisfaction of the needs it experiences generated by the objectives it assumes and how it mentally imagines and implements the actions that can produce the expected results, as well as the way it evaluates these results emotionally, considering both a personal space and a social space of sharing needs, benefits and risks.

The nervous system of organisms is responsible for their sensory perception and motor control for the search for food, sex, and protection, and for attack or escape. In an ecological environment where organisms interact with similar or different organisms, in a cooperative or competitive manner, their nervous systems also began to create action plans related to the survival of the organism and to condition the activity of all their tissues and organs in order to provide the organism as a whole with the most effective movements possible. These automatic reactions also become part of the conscious perception of the organism, now as the emotions of the conditions of its tissues in function of the action plans of the organism as a whole in reaction to the environment. The memory of these emotions associated with other individuals, or even inanimate objects, as well as with situations and events can now be understood as the feelings we have at each moment about everything we may have had contact with, based on the memory we have of past experiences. The extent to which our feelings integrate a more or less positive or negative state of the emotions we feel and remember or that we can still imagine feeling, can be understood as our mood state that we experience at each moment.

Thought is understood as a process of conscious imagination involving objects and actions, creating events that establish episodes, which can be linked together with different possible relationships. This imagination can be either a retrospective memory of previously perceived objects and episodes, or a new mental creation of objects and episodes never experienced before, which may or may not eventually occur. This creative imagination can generate a prospective memory that can be imagined again and remembered with more or less modifications. Reason can be understood as a process of conscious thought that involves precisely the establishment of relationships between events and/or episodes, caused by different objects and actions, and these objects and actions may have been memorized with different attributes or qualities constituting their meanings. In this way, different individuals can have different rational thoughts, both by establishing different relationships between the imagined events and episodes and by having different memories about episodes already experienced, retrospectively or prospectively, as well as by having different memories about the objects and actions themselves involved in these episodes. From this perspective, we can propose that our thinking and reasoning depend on our capacity for perception, memory and recognition of both physical and abstract objects, as well as events and episodes generated by the actions of these objects.

People rely on a limited number of heuristic principles that reduce the complex tasks of assessing probabilities and predicting values to simpler judgmental operations. The conception of judgmental heuristics is based on “natural judgments” that are routinely made as part of perceiving events and understanding messages. Such natural judgments include calculations of similarity and representativeness, attributions of causality, and assessments of the availability of associations and exemplars. These judgments are made even in the absence of a specific task set, although their results are used to meet task demands as they arise.

In organisms with motivated behavior, we observe what we understand as their decisions through the free will of self-perception, that is, their self, a condition that each individual experiences consciously as their mental and emotional state of their biological, psychological and social condition. This conscious state of their own identity in the physical and social environment that the organism manifests also constitutes, in humans, an imagination and memory that they create about the image that they themselves and also each other organism in their environment may have of them. This image constitutes the personality that each of us has as the result of all our behaviors over time in different spaces.

The decision-making process for the most appropriate action to satisfy any need is a function of the benefit, risk and cost of implementing each action, compared among all those imagined, considering a factor of personal acceptance and social rejection, both in cooperative and competitive spaces, according to the benefit and risk caused to others by the action performed. The evaluation of this adequacy can generate conflict, interfering with the time allocated for the action and thus altering the desire to act according to the passage of time. In complex organisms, the general action to be performed to satisfy a need or desire is generally also more complex, involving several movements and events - intermediate actions - over different periods of time (some lasting years and decades). Thus, the more general action can be constantly monitored and evaluated for continuous decision to continue, interrupt or change the intermediate actions. All results, obtained or observed during any moment of execution of the actions, can be used to learn about the benefits, risks and costs experienced, in relation to those foreseen.

Two temporal factors influence decision-making: 1) temporal discounting: the speed at which benefits and risks are devalued as the implementation or outcome of an action is postponed in time, and 2) future time perspective: the perceived dimension of the future that defines our temporal horizons of action. The time to decide is also subject to the conflict that we may experience, which results from the ratio between benefit and risk and can also have its origin in disputes generated by clashes between personal and social interests. In these situations, the assessments of benefit and risk in the personal and social spaces are compared to calculate the adequacy of implementing the action.

Decision-making, when there are alternative solutions for satisfying a given need, involves the evaluation of what economics calls opportunity benefits and risks. If the expected benefit for action a is greater than that expected for action b, then the relative benefit of a given b is positive; otherwise, it is negative. Likewise, if the expected risk for action a is less than that expected for action b, then the relative risk of a given b is positive; otherwise, it is negative. Under these conditions, economics proposes that the opportunity benefit of a given b should depend on its expected benefit plus its relative risk, since the possible risk reduction by not implementing action b increases the possible benefit by choosing action a. Likewise, the opportunity risk of a given b should depend on the expected risk for its implementation plus its relative benefit, since the possible benefit reduction by choosing action a instead of action b increases the expected risk for implementing a.

Economic behavior can be understood as the management of resources necessary for both survival - maintenance of the biological metabolism of the organism's cells - and for its emotional well-being. However, life manifests itself mainly as groups of organisms that can survive and reproduce together. In our lineage of placental mammals, we observe life taking place as family groups, where the dynamics of movement and reproduction of its individuals establish bands that live autonomously but with the possibility of their members migrating from one band to another, favoring genetic and behavioral variability. These sets of bands related genealogically and culturally constitute units called tribes. Throughout the migration of different bands and tribes around the planet, including other human species, situations arose of cooperation and competition between groups of bands and/or tribes in order to generate what we have come to understand as alliances and wars.

The decision on the most appropriate actions is therefore made based on the desires of each individual in the group and/or tribe and how much each of these desires is considered in the collective decision necessary for the action of the group as a whole. This social space now creates a condition for collective decision-making understood as the manifestation of political behavior. Just as economic behavior is governed by an emotional mechanism of motivation, political behavior also involves the use of emotions to assess how much benefit or risk each action can cause, that is, pleasure or displeasure to others. In this situation, actions that an individual deliberately performs to benefit others are judged by their peers as a morally acceptable action, while actions that cause a premeditated risk to others will be considered morally negative or immoral actions. Thus, we see moral behavior as being, at its biological basis, a need for communion among members of the same group who seek to benefit each other in a cooperative environment, where any competition that may arise does not result in any social harm, that is, risk to any other member of the group.

The creation of money was fundamental to the development of intertemporal exchanges, as it has a value that is preserved over time and serves as a reference for exchanges and as a reserve of wealth. In this sense, money depends on the degree of satisfaction that a good or service can generate for the individual's needs and serves as a reserve of satisfaction for intertemporal exchanges. It allows producers and consumers to relate their levels of satisfaction in selling and buying with the satisfaction generated by goods and services as solutions to their needs.

The cost of producing a good or service is determined by the energy cost of implementing the action that generates the good or service and by the energy cost of bearing the risk of this implementation. How much an individual is willing to spend to produce/obtain a good or service, that is, its acceptable cost of production, will depend on the production price and the desire to produce or obtain it, and should be considered a parameter that is related to the total amount of resources that the individual has available. Human diversity ensures that different individuals will have different acceptable production costs, so that their desirable selling prices are lower than the acceptable costs of others, thanks to their comparative advantage. The acceptable purchase price is influenced by our desire to obtain the good or service, the expected reward and our wealth parameter. The buyer evaluates how fair the offer price is according to their acceptable production cost, influenced by their desirable purchase price.

A market that evolves and becomes more sophisticated must motivate its agents to evolve, becoming more intelligent and creative, in order to increase their competitiveness in this more demanding market. The first step in this direction is to increase the diversity of individual agents, because without this the institutional agent will not increase its creativity. But the evolution of management methods, among others, is essential for the institutional agent to be more efficient. Creativity depends, among other things, on the diversity of tools available for new plans and strategies that solve new problems or needs. The increased complexity of work with the increased diversity of agents, in turn, requires the evolution of the management system. The increased diversity of agents increases the frequency and intensity of conflicts; therefore, it requires the improvement of the rules for obtaining consensus, improvement of the tools to be used by regulatory agents and the creation of new regulatory agents with new objectives.

The creation of money was fundamental to the development of intertemporal exchanges, as it has a value that is preserved over time and serves as a reference for exchanges and as a reserve of wealth. In this sense, money depends on the degree of satisfaction that a good or service can generate for the individual's needs and serves as a reserve of satisfaction for intertemporal exchanges. It allows producers and consumers to relate their levels of satisfaction in selling and buying with the satisfaction generated by goods and services as solutions to their needs.

The cost of producing a good or service is determined by the energy cost of implementing the action that generates the good or service and by the energy cost of bearing the risk of this implementation. How much an individual is willing to spend to produce/obtain a good or service, that is, its acceptable cost of production, will depend on the production price and the desire to produce or obtain it, and should be considered a parameter that is related to the total amount of resources that the individual has available. Human diversity ensures that different individuals will have different acceptable production costs, so that their desirable selling prices are lower than the acceptable costs of others, thanks to their comparative advantage. The acceptable purchase price is influenced by our desire to obtain the good or service, the expected reward and our wealth parameter. The buyer evaluates how fair the offer price is according to their acceptable production cost, influenced by their desirable purchase price.

A market that evolves and becomes more sophisticated must motivate its agents to evolve, becoming more intelligent and creative, in order to increase their competitiveness in this more demanding market. The first step in this direction is to increase the diversity of individual agents, because without this the institutional agent will not increase its creativity. But the evolution of management methods, among others, is essential for the institutional agent to be more efficient. Creativity depends, among other things, on the diversity of tools available for new plans and strategies that solve new problems or needs. The increased complexity of work with the increased diversity of agents, in turn, requires the evolution of the management system. The increased diversity of agents increases the frequency and intensity of conflicts; therefore, it requires the improvement of the rules for obtaining consensus, improvement of the tools to be used by regulatory agents and the creation of new regulatory agents with new objectives.

The creation of money was fundamental to the development of intertemporal exchanges, as it has a value that is preserved over time and serves as a reference for exchanges and as a reserve of wealth. In this sense, money depends on the degree of satisfaction that a good or service can generate for the individual's needs and serves as a reserve of satisfaction for intertemporal exchanges. It allows producers and consumers to relate their levels of satisfaction in selling and buying with the satisfaction generated by goods and services as solutions to their needs.

The cost of producing a good or service is determined by the energy cost of implementing the action that generates the good or service and by the energy cost of bearing the risk of this implementation. How much an individual is willing to spend to produce/obtain a good or service, that is, its acceptable cost of production, will depend on the production price and the desire to produce or obtain it, and should be considered a parameter that is related to the total amount of resources that the individual has available. Human diversity ensures that different individuals will have different acceptable production costs, so that their desirable selling prices are lower than the acceptable costs of others, thanks to their comparative advantage. The acceptable purchase price is influenced by our desire to obtain the good or service, the expected reward and our wealth parameter. The buyer evaluates how fair the offer price is according to their acceptable production cost, influenced by their desirable purchase price.

A market that evolves and becomes more sophisticated must motivate its agents to evolve, becoming more intelligent and creative, in order to increase their competitiveness in this more demanding market. The first step in this direction is to increase the diversity of individual agents, because without this the institutional agent will not increase its creativity. But the evolution of management methods, among others, is essential for the institutional agent to be more efficient. Creativity depends, among other things, on the diversity of tools available for new plans and strategies that solve new problems or needs. The increased complexity of work with the increased diversity of agents, in turn, requires the evolution of the management system. The increased diversity of agents increases the frequency and intensity of conflicts; therefore, it requires the improvement of the rules for obtaining consensus, improvement of the tools to be used by regulatory agents and the creation of new regulatory agents with new objectives.