How We Decide

also read Descartes’ Error, by the neuroscientist Antonio Damasio.22 Damasio had noticed an unusual pattern of symptoms in patients who had suffered brain damage to a specific part of the brain—the ventromedial (i.e., bottom-middle) prefrontal cortex (abbreviated vmPFC; it’s the region just behind and above the bridge of the nose). Their emotionali

http://www.foreignpolicy.com/story/cms.php?story_id=3660.

When the answers to the first three questions above is one person, markets tend to work reasonably well, at least so long as people have adequate information and are not suffering from behavioral biases.

By far the best theory for describing the principles of our irrational decisions is something called Prospect Theory. Created in 1979 by the psychologists Daniel Kahneman and Amos Tversky, prospect theory describes how people choose between options that involve risk, like in a negotiation. The theory argues that people are drawn to sure things over