Economics of the brain 💵
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As I’ve mentioned in previous articles, I’m a big fan of intuitive models, especially those that draw parallels between different fields. What better way to understand complex phenomena than some good ol’ analogies? Ideology aside, I hope this article provides you with some insights into the brain through the lens of economics. 😊
Table of contents
· Table of contents
· Bridging micro and macro
· Land, labor, capital
∘ Land
· Labor
∘ Capital
· Allocating scarce resources
∘ Attention
∘ Oxygen and glucose
· Inflation and bankruptcy
· Inflation
· Bankruptcy
· Takeaways
· About the author
· Sources and further reading
Bridging micro and macro
Economics is largely about decision-making. Whether it’s individuals, corporations, governments, or regions in your brain, economics is about how these entities assign value to different actions and make choices accordingly.
I was listening to an episode of The Knowledge Project the other day with angel investor Naval Ravikant. At one point, he says that macroeconomics — which functions at the level of governments and countries — is just as good as astrology. There are so many factors to consider that predicting trends is as fruitless as analyzing the daily horoscope.
Rather, he said, you should embrace microeconomics, which concerns the decisions of individuals and businesses. Focus on decision-making you can actually understand before trying to tackle grand and abstract economic dilemmas. Individual choices scale up to change the world.
I don’t know if I’d go so far as to say that macroeconomics is BS, but I’ll give you an analogy: In the context of neuroscience, microeconomics is like using calcium imaging to study the firing patterns of neurons, while macroeconomics is like using psychology to study the behavior resulting from the combined efforts of your hard-working neurons.
