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The New York Times On Neuroeconomics

Posted by timothy on from the say-hello-to-messrs-sterling-and-gibson dept.

ravenousbugblatter writes "The New York Times technology section has an article discussing the increasing attention that neurologists are devoting to the study of the human mind in relation to economics. It looks like John Nash's game theory could have yet another application."

21 comments

  1. Economy of the Living Dead? by Rick+the+Red · · Score: 3, Funny

    I must not be getting enough sleep.Either I'm brain-dead, or I have dead on the brain. I thought it said "The New York Times on Necroeconomics."

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    If all this should have a reason, we would be the last to know.
    1. Re:Economy of the Living Dead? by Anonymous Coward · · Score: 0

      Damn! People are just burning up the boards posting on this thread. Hope all this traffic doesn't crash the server.

  2. It's not in the Technology section by Vacuum+Sux · · Score: 1

    The article is in the Science section of NY Times.

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    In Soviet Russia, the profit overlords welcome you!
  3. Nash by mmport80 · · Score: 2, Informative
    It looks like John Nash's game theory could have yet another application.

    Wrong!

    As far as I understand Nashes approach was a wholey rational one.

    This neural science approach ackowledges that people aren't rational and tries to explain why.

    1. Re:Nash by Daniel+Dvorkin · · Score: 3, Interesting

      Yep. And for that reason, I predict, free market fundamentalists (Randoids et al.) are going to reject this research out of hand. "The market will take care of it" makes sense if and only if people act rationally. But because they do make decisions based on their guts instead of their heads, giant companies with shitty products and great P.R. end up ruling the day -- which the FMF's take as proof that the market is working! (Yes, kids, that's right. Britney Spears is the greatest singer ever. You need $300.00 shoes or you won't be able to walk. And you can't use a computer without Windows. Trust us.) In the current political climate, this research will be buried.

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      The correlation between ignorance of statistics and using "correlation is not causation" as an argument is close to 1.
    2. Re:Nash by nelsonal · · Score: 1

      Actually the free market economists are still coming up with theories as to why advertising works, under their assumptions consumers should already know everything about all the products that are available. We use these assumptions because they work better than other assumption sets at predicting most consumer behavior. Companies with crap products and infinate marketing budgets should not have any sales under perfectly rational consumer behavior. Most economics research is focused on improving the models and assumptions that better explain irrational behavior. Nash was one way of explaining how rational beings could reach less than optimal outcomes while acting rationally.

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      Degaussing scares the bad magnetism out of the monitor and fills it with good karma.
    3. Re:Nash by l2718 · · Score: 1

      Not only that, but game theory is not John Nash's invention. He did make fundamental contributions, but that was after things have started.

      The definition of game theory (i.e. the principle of min/max analysis) based on saddle points of convex functions is due to John von Neumann. Nash showed that in cetain cases when a von Neumann equillibrium do not exist, there might still exist (non-unique) weaker equillibria. This does not make game theory Nash's.

      Even though Kolmogorov's contributions to probability theory, say, are much greater than Nash's to game theory, you wouldn't see references to "Kolmogorov's theory of probability" anywhere.

      This happens often: after a scientists gets (meritorious) headlines, everyone seems to assume he's either the the founder or current leader of the field, just because they haven't heard of the real founders and leaders.

    4. Re:Nash by Madcapjack · · Score: 1
      Well, game theory hadn't accounted for irrationality in the past, but I'd like to make three points. First, positing rationality is a wonderful baseline to evaluate actual behavior and it has been used very often for this very purpose e.g. this article: http://www.sscnet.ucla.edu/anthro/faculty/boyd/Mac GamesBBSFinal.pdf Second, game theorists are increasingly incorporating bounded rationality into their game theoretic models. Third, the applications of game theory are not limited to rational actors. It has been quite sucessfully applied to evolutionary models, for example. I think the first to do this was Gould, but I'm not sure on that.

      jacob

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      Logic, macros, and more
  4. question by kurosawdust · · Score: 2, Insightful

    at what point does this kind of research (and subsequent advertising that arises from it) become more like pulling levers on human money-machines (you WILL buy Alex Chiu's immortality rings...) and less like a free market proposition (I got these rings. Want em? Don't want em? OK.) ?

  5. Neuroeconomics... by t4eXanadu · · Score: 2, Interesting

    This neural science approach ackowledges that people aren't rational and tries to explain why.

    Then that is their first very big mistake. I am totally amazed as the Scientists and Analytic Philosophers who are insistent that the world can be reduced to/ explained by/ etc., grand theories and laws which govern everything, including human behavior.


    Speaking of behavior, If you are familiar with Psychology, you would know that today we still do not know HALF as much as they like to claim. We are still as very much confused as any philosopers/psychologists were about the mind in Freud's time. We've just manage to classify a bunch of disorders instead of calling them all neurosis/psychosis.


    The same in the Philosophy of Mind field. We haven't made any headway for 100 years, and some might argue since Plato.


    My point? The idea that highly irrational (i.e. random, and non-deterministic) can be explained by absolute, deterministic laws. Of course, the Quantum Physicist might agree, and propose a Quantum explanation of consciousness and human behavior, its not new, but its not any more valid than Freud.


    -Andy

    1. Re:Neuroeconomics... by anvilmark · · Score: 1

      While I agree that this research will never be able to predict individual behavior - I disagree that we cannot derive laws of (group) behavior.

      We cannot determine when a particular radioactive atom will decay, but we can statistically predict how many will in a given population in a set time. I think this research might lead to a similar set of statistical rules for predicting the behaviors of human populations.

      (btw, I completely agree with you on the failure of modern Psychology to deliver what it promises)

    2. Re:Neuroeconomics... by sirket · · Score: 1

      This was the basis of Hari Seldon's PsychoHistory in Isaac Asimov's Foundation.

      -sirket

    3. Re:Neuroeconomics... by Anonymous Coward · · Score: 1, Interesting

      A Law is any useful heuristic. The labels we use for emotions are such heuristics. I don't know what you feel like when you are "angry", but I can make a reasonable guess. Human motives are certainly irrational as you suggest, but that doesn't mean that people are unpredictable. Hence the fact that marketing and great PR work in the first place. Which is, I think, what this is trying to say. As opposed to conventional market theory, which says rational decisions (transactions) are the driving factor behind a market.

    4. Re:Neuroeconomics... by Anonymous Coward · · Score: 0

      Okay, you are flatly asserting that people behave 'randomly.' I am obviously supposed to take that on the strength of your say-so. Uh-huh.

      Assuming people do behave randomly, you have a couple of problems:

      (1) The real notion of randomness (not free will) involves a conception of what outputs are possible. E.g., a random coin produces heads or tails. What is the equivalent for people? (Obviously you would know this, since you've fully evaluated the claim that people behave randomly). How do you define what a behavior is?

      (2) You will be hard pressed to explain how it is that people are so regular in so many regards, even in trivial ones like usually loving their mothers etc. You would have to demonstrate that these regularities don't actually exist. You can't.

      Stupid troll.

    5. Re:Neuroeconomics... by t4eXanadu · · Score: 1
      Well, In regards to random behavior, suppose my choice of words was wrong, it obviously did not convey what I intended.


      Depending on who you ask, irrationality and (to avoid using random) let me say, irregular, behavior is not so irregular. If you ask the behaviorist, they can and will account for most of not all of human behavior, socially, private or otherwise.


      I am obviously supposed to take that on the strength of your say-so. Uh-huh.


      I did not mean to law out some absolute truth, but it is not unreasonable, and pretty obvious to me that human behavior is irrational, and partly unpradictable.


      (2) You will be hard pressed to explain how it is that people are so regular in so many regards, even in trivial ones like usually loving their mothers etc. You would have to demonstrate that these regularities don't actually exist. You can't.


      No, outward behaviors I cannot refute. However, it seems, to me anyway, that merely observing outward behavior is a poor assesment of that behavior (the prime objection to behaviorism). One must take into account the cognitive processes at the time of a given behavior to fully explain it, which is impossible. The reason something like the Cognitive-Behavioral model in Psychology is popular today, is because of that reason. We can get a detailed account after the fact that sheds some insight into a given action or occurance.


      Having said that, If we were to consider the cognitive processes as a part of the behavior (the behavior an extension of the cognitive process or vice versa) it would make the entire given behavior much different. The act of, loving your mother, as you said, would include a private cognitive basis which varies alot from yours.


      Way off topic here, sorry about that. I'm sure I caused more problems then solutions, but since no one that I have read or talked to has an explanation that is anymore on target, I figured I would give it a go.


      -Andy

    6. Re:Neuroeconomics... by NoData · · Score: 2, Informative


      I respectfully point you to the work of Kahneman and Tversky. Read Judgment Under Uncertainty. And Choices, Values, and Frames. Kahneman didn't win a Nobel Prize for not delivering on some very real principles of human behavior.

      There are patterns and principles to the kinds of irrationality humans exhibit. Psychology, exemplified in the work of Kahneman and Tversky, has made tremendous progress in characterizing how people behave. K & T's stuff has especial bearing on economic behavior which is the topic of the research discussed.

  6. sounds like the matrix to me... by SolePatch · · Score: 1

    Maybe someday they will figure out a way to plug somebody's head into the stockmarket.

    1. Re:sounds like the matrix to me... by xchino · · Score: 1

      I'm guessing you've never met a stock broker before.

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      Everyone is entitled to their own opinion. It's just that yours is stupid.
  7. Software Agents... by bretth · · Score: 1

    I work in the area of developing risk management software for financial institutions. This type of software uses a statistical analysis of market data to provide greater insight and will hopefully allow the user to make more rational decisions.

    It will be interesting to see if, in the future, the use of software "agents" to help people make rational financial decisions will overcome the whole "gut feel" approach characterising the current decision making process and maybe lead to the so-called "efficient market" that most financial theory is based on.