In microeconomic theory, price is an exogenous variable, an unexplained variable. I read an essay recently in which the author claimed that neuroscience seems to have derived where the price arises: behavioral tension motivates both the buyer and the seller. The implications of this essay lead to a focus on ethics within the firm, something I have rarely, if ever, heard in the classroom discussions on price theory. The author, Gerald Cory, of the essay, The New Findings From Evolutionary Neuroscience, noted that the invisible hand as observed by Smith served as a “tug and pull between ego and self interest.”  In the Wealth of Nations, for example, Smith said “Give me what I want, and you shall have what you want, is the meaning of every such offer. (Smith 1776, Book I, ch. 2).

Cory suggests that neoclassical economics commits a fallacy of self reference by assuming all motives would have been guided by a calculated self-interest. In other words, all motives in the standard textbook describe motivations as a rational self interest. And this was good. For as we were taught in econ 101, the invisible hand provided a greater good, namely, freedom allowing individuals within to society to engage in voluntary transactions that had benefits beyond the butcher’s motive to make a profit. However, trivializing empathy, cooperation, and altruism, as simply tastes and preferences, he notes, fails to consider that every supply and demand curve has an implicit duality of ego and empathy, particularly at equilibrium. Supplier performs an empathetic role, while the demander performs an egoistic role.

Thus, the structure of the market epitomizes an institutional form of this duality. Entering into an exchange results in give-and-take that requires mutual benefit, reciprocity, and respect for self and others, or ego and empathy. All of the complex interactions at the market, Morris contends, were derived from this evolutionary process. This he claims is the derivation of price and that markets couldn’t have been maintained by self interest alone. Without empathy, no one would have known how to respond to participants in the market. Market behavior tends toward a balance, a unifying link between neuroscience and social exchange theory, not necessarily the elusive dynamic taught in microeconomics textbooks as the hand of a deity, Newtonian mechanics, or any other process favored by the author of a textbook.

Neural network models express this observation onto mathematical operations by which a behavioral tension would equal a numerator (ego) divided by the denominator (empathy).  This CSN model, the researcher suggests translates to an equilibrium price in microeconomic theory (demand/supply) and a political tension in the political economy (domination/subordination), more or less. Neither dinosaurs nor crocodiles have been know to create markets. I found the essay intriguing. The implications were profound. Since all exchange is social by its nature, not necessarily financial, the theory of the firm can be interpreted as a social construct. The resulting dual motive theory calls into question the self-interested homo economicus revealed in micro textbooks. By focusing on this self interest, ethical issues will arise within the firm. If self interest is at the heart of all exchange, then genuine concern might be a sham; cynicism is not always a great trait. This looks like one of the justifications for greed. 

The balance suggested by the dual motive theory explains both the derivation of price and a statement of the nature and source of ethics.Altman, Morris. Handbook of Contemporary Behavioral Economics : Foundations and Developments.
Armonk, NY, USA: M.E. Sharpe, Inc., 2006. p 36.
http://proxy.tamu-commerce.edu:10661/lib/tamucommerce/Doc?id=10178072&ppg=58 Copyright ? 2006.  M.E. Sharpe, Inc..  All rights reserved.

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