A Neuroscience-Based Analysis of Impacts of Disaster Memory on Economic Valuation

The purchase and sale of assets such as housing will increasingly be affected by forces related to a changing climate. This article considers decisions over assets as a neurobiological process in which an associative memory with pattern completion informs choices. We develop these neuroeconomic explanations and analyze their implications for climate change-related shocks in asset markets, and discuss these effects in the context of both individual experiences as well as community-driven remembering. These neuroeconomic models provide mechanistic explanations for behavioral responses to more easily accessed information (the “representativeness” and “availability” heuristics, “framing” and “priming”). Understanding the links from neuroscience to economics is critical to building policies and institutions capable of coping with and adjusting to disasters affecting real assets that are increasing in frequency and scope due to climate change.