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Neuroeconomics: Biotech Meets Economics
grimiore1 writes "The Economist has a story today introducing the concept of Neuroeconomics, which uses brain scanning technology and neuroscience to create new economic models and theories."
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Welcome our new brain-scanning Kroger Value Member overlords.
When we truly understand the mind, will we really need an economy? Cognitive science is a field I find myself interested in. As such, I've often pondered what society will do when we've unlocked the secrets of the mind. Now I know...
How can the greedy be phased out? How much does one man need?
"Economists have usually assumed that people's well-being, or "utility", depends on their level of consumption, but it might be that changes in consumption, especially unexpected downward ones, as in these experiments, can be especially unpleasant."
It seems then that education can subdue a feeling of loss after an economic tradgedy. Most people who lost their savings in Enron for instance, were not aware their retirement hinging on the profitability of one company, was not a secure portfolio.
Saskboy's blog is good. 9 out of 10 dentists agree.
Interestingly, the guys doing the 'cash your paycheck now' seem to have already tapped into this insight.
Even people who need the cash now would often be better off just telling their landlord they'd be late - yet these check-cashing places (that do almost exactly that $100 now vs $115 in a week) do well.
Wonder how they figured this out without brain scanning? :)
Whose brain should qualify?
an evil genius would do good.
"ironic"
I don't really think so. All that they really are doing is showing that our thought processes are largely governed by our desire to survive. By increasing the amount of money, the researchers pretty much told the subjects minds that they are being more successful in their environment -- just a positive feedback system increasing survival chances of the subject. I dunno, this research doesn't really prove anything.
Sig* sig = theOneSig();
Now I can provide commercial lowns that net about 25% return in as little as a week, and you show these companies the payment schedule up front. They still *NEED* the cash now, go figure. I'm not complaining.
Considering that the whole concept of economics was created in human minds, using the human mind to better understand it seems quite logical.
'Every story, if continued long enough, ends in death.' --Ernest Hemingway
Applaud the next vague money landgrab...
I think the fatal fly with this idea is the very questionable presumption that investors behave rationally.
Frome the Neuromancer department!! HAHA I got a good laugh out of that one.
""The Economist has a story today introducing the concept of Neuroeconomics, which uses brain scanning technology and neuroscience to create new economic models and theories.""
I'm thinking of...discounts. Anyone else?
Interesting read. Let's say the neuroeconomists find some new microeconomic stuff that deviates from the standard assumption of rationality. Wouldn't people respond to that by using this information about systematic non-rationality to transfer wealth from "non-rational" to rationals? I.e. the object observed (human interaction) will be affected by the results of the observer (the research), which will render the conclusions of the result questionable. Just some random thoughts -- guess it applies to all social sciences, and economics in particular :-)
http://www.mralert.com/ - Free web site monitoring
Perfect price discrimination. Yay.
This work is valuable. The tradition of individual choice in economics has been pretty much based on two approaches until recently. The first approach has largely been one of a bunch of people saying to each other "this seems reasonable doesn't it?" and when enough of them answer "yep", it goes into the theory. The second approach is an attempt to be hardcore scientific and positivist, which basically meant you couldn't put anything in the theory which smacked of knowing how a person felt about anything.
Those two approaches balanced each other out OK, but it obviously leaves things incomplete. Experimental economics in general and neuroeconomics in particular takes things out of that purely thinking-about-it realm and starts to make it empirical. That's mighty cool.
On the other hand, the article was terribly lax in what it considered economics. "Economics" can cover a lot of ground, but reducing it to psychology or cognitive science is counterproductive. Economics is properly about interactions between people, often very large groups of people. Identifying what happens in someone's brain when they think about expected values--or even when they're playing a game with someone else--only tells you about the individual, not the system.
An important part of economics is in describing the individuals, who are usually treated as the "atoms" of an economic system. But economics is more importantly about what happens when you throw a lot of them together, which will still require a lot that you can't get from brainscans.
Working out how people behave may possibly help, but since the occasional major scam or mental illness of the leading stockbroker in the country (happened in Australia) has major effects, you can't trust complex models very closely.
Economies surge and fall on hype, lies and what look like incredibly stupid decisions in hindsight. Surely the USA knew that bankrupting Europe in the 1920s by calling in the loans at once would hurt them as well? Who was going to buy their goods if no-one had any money?
Ever wonder why you see bears and tigers so often in commercials? Or certain colors? Or themes? ("I am different") That's because the powers-that-be have determined through exhaustive surveys that these are the things that push people's buttons the best.
Now I guess they're going high tech and studying the brain directly with MRI machines and stuff.
I have a suggestion for the big boys: Make a good product and sell it at a reasonable price.
"All that they really are doing is showing that our thought processes are largely governed by our desire to survive. "
Guess that explains why slashdotters always have sex on their mind.
"By increasing the amount of money, the researchers pretty much told the subjects minds that they are being more successful in their environment"
No sex must mean no money then.
Well...it depends. That statement assumes that a person has preferences described by a risk-neutral utility function (for example, a linear function). In that case the utility a $1000 gain would fully compensate for the decline of utility from a $1000 loss.
However, people can also be risk-averse (in which case the loss in utility from being out $1000 would be greater than the gain from receiving $1000) or risk-loving (in which case the opposite situation happens). Further, they can be any of those within particular intervals. It's generally accepted that not all agents are risk-neutral (though it does make some models easier to build).
that the Foundations of this seem so Psychohistoric. Wish this was first speaker, er first post...
Say hello to my little sig.
...how could economists create a truly accurate model of people's feelings towards, for example, changes in the USA's federal reserve interest rates, without having to take costly (and time-consuming) scans of large portions of the population? All people are different in their reactions to economic change, and I think that it would be therefore impossbile to create an accurate analysis of such a large group of individuals such as a the national US population.
The same basic flaw exsists in national surveys and all methods of statistical analysis: your results may end up close to the actual figures for which you search, but the reults will never be 100% on point, adn when you're talking about matters dealing with a nation's economy, you need accurate and detailed information so that you don't make mistakes which may influence the lives of hundreds of thousands (if not millions) of people.
Just my 2c, take/leave whatever you want.
Biotechonomics.
IANA neuroscientist...
...but in this article, the scientists are trying to draw conclusions about how the brain functions, from a standpoint relevant to economics, by looking at fMRIs. There's nothing wrong, per se, in doing this, but I don't think brains scans are really a very good tool for determining the mechanism of brain activity in this context, or even a very good mechanism for determining the locality of brian activity. This is because:
1. fMRIs don't have very high resolution (not much less than 100 cubic millimeters per voxel)
2. They measure blood flow, which might be related to where the "thinking" in the brain is most intense, but who's to say that the "real work" isn't happening somewhere else by a smaller number of less blood-consuming neurons.
3. Brain scans only show correlation, not causation- We might be able to say that certain brian activity and behavior seem to be connected, but you never know whether an uncontrollable "third variable" might be mucking up the results (note how these experiments involve some math- maybe the brian regions are just showing activity because of math calculations?)
There seems to be a lot of grant money out there for people who say "hey! I know! let's research X by sticking people doing X in a brain scanner!" The media loves reporting on this stuff for some reason, but it seems many of the results from such studies are pretty shaky and inconclusive, compared to more invasive studies that measure actual receptor activity or responses to drugs- Or involve anatomical studies in cadaver neurons. Again, just my personal opinion- and in some cases, there probably is no other way to get data and some data is better than nothing.
from the article:
For example, the idea that humans compute the "expected value" of future events is central to many economic models.
And a rather sad and relevant example of how many humans do NOT compute the expected value of future events is the freemarket-free trade-libertarian computer/engineering geeks, and how they all seem to think THEY will be rich, and so unionizing or similar organizing is not needed for their occupation. This type of personality/age group is typically quite illogical when it comes to calculations of a personal economic nature. I refer you to their historical inclination to be exploited as fodder for the for military-industrial complex profits machine.
eat shiat and bark at the moon
The following field have now just been created..
Neuroreligion: to understand the neurological need to have a faith/religion/cult to be a part of
These neurologists are going to attemtpt to assign "values" to utility, usually with a arithmetical number that they can plug into a differential equation so they can appear impressive. However ye' old Austrian school realized that attempts to utilize the methods of physics in describing economic behaviour are bound to fail due to the problem that people acting purposefully make purposeful decisions while falling bodies or two chemicals reacting with each other do not make purposeful decisions.
One way that the difference between physics and economics really stands out is how cardinal values play a big role in physics down to the tiniest levels but on the level of the individual economic decision maker, cardinal values do not describe well how decisions are made.
Cardinal values are values that you can perform arithmetic on. Examples are weights of things, for instance one man can carry 25kg, two people can carry 50kg, one man can carry 5 things each weighing 5 kg.
Ordinal values are values that are merely descriptive and cannot be combinded, divided, multiplied,etc or doing so produces a nonsensical result. Examples of ordinal values are People's Names, Zip Codes, etc. You can add two zip codes together but it's not going to MEAN anything.
In the same way economic decisions are made based on ordinal desires that at best are only arrangable on a constantly changing scale of preference of known available goods.
Let me put this in Slashdot terms: Why is a vic 20 worthless today but it was worth $100 twenty years ago? Even though there has been significant inflation since then? Because it provides less "utility" then it did then??? No, according to the classical definition of utility, you can still plug it in and program it in basic, just like you did twenty years ago. You can still load text games and play them like you did 20 years ago. It's got a rip roaring 300 baud modem that you can use.
20 years ago, one could work at a decent job for 10 hours and buy a vic 20. Which you might want to do if you were a geek and into basic programming.
Now if one works at ones job for 1/2 hour you can buy a vic 20 on ebay, but if one works at ones job for 10 hours one can buy a regular modern pc. Why would anyone forgo the vic 20? Doesn't it have the same utility and it's selling for 1/20 the price? Well the effort of 9 1/2 hours of work and forgoing the other things you could buy for the money are enough to make it worth while to not bother with the vic20 and pick up the new pc for most people.
So basically all the numbers you applied to your vic20 demand supply/curve differential utility equation are going to be speculative at best because of alternatives , new technology, fads, trends, etc that constantly change the economic landscape.
Bullshit with a $300 tie.
And a rather sad and relevant example of how many humans do NOT compute the expected value of future events is the freemarket-free trade-libertarian computer/engineering geeks, and how they all seem to think THEY will be rich, and so unionizing or similar organizing is not needed for their occupation
I dont think most libertarians or free-market geeks believe they will become rich or wealthy. I don't quite get where you think that.
This type of personality/age group is typically quite illogical when it comes to calculations of a personal economic nature.
Pot Kettle Black.
I refer you to their historical inclination to be exploited as fodder for the for military-industrial complex profits machine.
Libertarians tend to oppose military industrialization.
You don't make sense.
- You can get a lot of results with just ordinality. (Note you can get these same results with cardinality, you just don't always need it.)
- Economists like to think of themselves as scientific, which often gets interprested as positivistic, and want to avoid making unfalsifiable assumptions.
So, one of the potential boons of neuroeconomics is what you point out: it can empirically start filling in gaps where economists have been avoiding making assumptions. It's possible that might include starting to use cardinal values where before only ordinal were used. It might even get radical into interpersonal comparison of utility. Hopefully it won't jsut be a boondoggle.This discussion thread contains material on neuroscience. neuroscience is a theory, not a fact, regarding brain function. This material should be approached with an open mind, studied carefully, and critically considered.
"It is not how things are in the world that is mystical, but that it exists." -Ludwig Wittgenstein
IANA neuroscientist...
I am.
1. fMRIs don't have very high resolution (not much less than 100 cubic millimeters per voxel)
Compared with other brain imaging techniques, fMRI has excellent spatial resolution. Where it is lacking is that is has relatively poor temporal resolution - since you can only take a scan every 2 seconds or so (if you are scanning the whole brain) then you can't get very fine information about temporal dynamics.
2. They measure blood flow, which might be related to where the "thinking" in the brain is most intense, but who's to say that the "real work" isn't happening somewhere else by a smaller number of less blood-consuming neurons.
Years of research. The connection between blood flow and increased neural activity is fairly well established.
3. Brain scans only show correlation, not causation- We might be able to say that certain brian activity and behavior seem to be connected, but you never know whether an uncontrollable "third variable" might be mucking up the results (note how these experiments involve some math- maybe the brian regions are just showing activity because of math calculations?)
I'm not sure what the criticism is here. In any scientific experiment, you manipulate one variable and examine it's effect on some measurement, in this case blood oxygenation in the brain. No one experiment answers all the questions.
There seems to be a lot of grant money out there for people who say "hey! I know! let's research X by sticking people doing X in a brain scanner!"
Not enough! It's quite expensive to do fMRI and federal funding from NSF is decreasing. It's not really as if people are throwing money around - grants are very competitive.
"Neuroeconomics, which uses brain scanning technology and neuroscience to create new economic models and theories"
So, a new scientific field has emerged to study the brain to develop the perfect "economic model".
Here is my model:
economics == money;
money == power;
power == control;
Which gives us:
economics == control;
Here is a question, Who do you think would be in the best position to take advantage of this type of information? Also, wouldn't neuroeconomics be considered a sub-field of social engineering?
Yeah, I also left out the time value of money because I thought a longer explanation would just confuse things -
But what is interesting is not that I'd rather have a smaller amount now than a larger amount in a week. What's interesting is that if you had asked me to make that decision a year ahead of time I would made the opposite choice. (I would have said I wanted the larger amount, in a year and a week.)
And neither inflation nor the time value of money can provide any explanation of why that should be true.
I think it would be interesting to see similar studies done in other countries and historic data for this. It seems to me that here in the U.S. we have become more interested in instant gratification, which is clearly an emotional response as the article suggests they are seeing.
Someone else may be able to explain why that is or blame it on MTV, but this would appear to be one of the results. Perhaps we as a nation have just been encouraged by too many social workers and such to be too emotional and not rational enough any more.
I don't think you will get brighter ideas from a dumb person. If nothing smart can come out of him then the nuerons fall in the same boat, dumb nuerons.
Yes I spelt nuerons instead of neurons. If I did not know the spelling neither would my nuerons.
These guys are just obsessed with pictures of the brain.
You make a lot of good points.
There seems to be a lot of grant money out there for people who say "hey! I know! let's research X by sticking people doing X in a brain scanner!"
Not enough! It's quite expensive to do fMRI and federal funding from NSF is decreasing. It's not really as if people are throwing money around - grants are very competitive.
But I have to disagree with this one! Basic behavioral and (many forms of) computational cognitive science are starving as everyone follows the dollars to cognitive neuroimaging.
Hopefully a balance between approaches will be restored before too long.
And this article is stamped with the peaty - like a good whisky - odour of behavioural and quasi-rational economics. Good to see they're poking brains now, though the growing addiction to brain scan tech in the social sciences reminds me of those french economics students protesting another myopic specialization: the over-mathematization of economics. I guess all the statistics was ok for them though, because its not actually a math.
:) )
OTOH, maybe economists want to buy a new Nobel category!
(in all fairness, I find economics extremely interesting, like wrt roegan/godel veins of thought. Its just economists i hate
In contrast, I know some people with rather full lives that have the occasional money crisis because they enjoy their wealth when they have it.
I am a neuroscientist, and you're fucking dead on. There is a lot of grant money in fMRI, and it's impressive technology, but the resulting information (as it is in every experiment) is only as good as your design & your analysis. In so many cases the analysis is bad enough to make the technique worthless.
Wow, I guess it's a good thing that my major (college student) is double majors in Biomedical Engineering and Electrical Engineering with minor in Economics! But I never thought that I would see this, lol.
For example, the idea that humans compute the "expected value" of future events is central to many economic models.
Humans may not do this on an individual basis, no. However, pretty much everyone who makes an economic decision attempts to do this, be it through guessing, heuristics, or with a spreadsheet. The interesting thing about markets is that they collect and aggregate all these decisions together and produce a very accurate result.
That's why, even though people may act without full logic and with error, markets tend to be efficient.
This knowledge must be interesting for a neuroscientist, but how does it become interesting for an economist? I mean what would be the optimal outcome of this research project? Would it be fMRI assisted management courses?
"What if we are dealing with something resembling a neural net, and the easiest way to describe it fully is to depict the states of all neurons and the relations between them? What if that is simply too much to depict?"
It does not matter whether it is too hard to use as description or whatever. The point I think the parent poster had, is, right now the only scientific explanation for consciousness (sic) is the brain, nothing more. If you have another hypothese involving more than signal coming from and going out of the brain for consciousness, please tell us. And then if you can falsify it and prove it, you not only get the right to be modded insightful, but also get a medicine and biology nobel price ! Isn't science wonderful ?
OTOH if you have nothing but conjecture that something else than the brain is the siege of consciousness, then frankly you are quite clearly diping in the "belief" side.
C. Sagan : A demon haunted world:
http://www.amazon.com/gp/product/0345409469/
visit randi.org
The pro-fmri bias is infuriating really.
The entire field of neuroscience is being slowly dragged into fMRI research because the money is there. And the money is there because brain pictures are pretty, so people who don't understand the underlying science are eager to throw money at the method. That's the really sad thing, an entire field of research is being corrupted because of aesthetics.
Every day valuable non-fMRI methodologies are thrown out the window in favor of crippled methods that are scannable because magnets are being built like Starbucks throughout the world. Inside a magnet, your experimental options are very limited compared to outside.
And for what? it's not as if knowing what part of the brain lights up tells you about how the brain is doing that thing. This article is an excellent example of the layperson naivete that feeds the fMRI cash-cow. Scientists have known about these failings of human decision making for many years. The idea that we are flawed at rational decision making is hardly news. But throw someone in a scanner, see part X light up and suddently we understand how the brain works?
Bollocks.
These imaging studies are useful yes, especially in the context of other things we know about what different parts of the brain do.
But they do not represent some bold (heh) new understanding of "neuroeconomics", which is just decision making theory and neuroscience given a fancy name.
Not enough?! Argh, it hurts to hear you say that.
Where do you think the money comes from? I'll tell you: it's sucked out of grants that used to go to much more efficient methodologies, like EEG, psychophysics, modelling and even simple behavioral research.
The money you spend in just magnet fees (nevermind the cost of building it in the first place) from just 1 single experiment is enough to pay someone's salary for an *entire year* running 3-4 psychophysics experiments.
Just so people understand what I'm ranting about you're often talking about some $800 in operating fees *per subject*, and at 30 subjects, that's $24,000.
Other methodologies are insanely cheap in comparison. You can buy an entire EEG rig for just $40,000, and each subject costs about $10-$20.
The fact that you consider the atrocious amount of grant money you (I'm guessing you do imaging research from the text of your post) gobble down *insufficient* is frightening to those of us who scrape by on experimental methodologies that are two orders of magnitude cheaper.
Imagers are like army ants, consuming all available grants in their path and always hungry for more money.
> Compared with other brain imaging techniques, fMRI has excellent spatial resolution.
True, but a neuron has has diameter of 100 microns- I'm just saying that in the popular media "brain scans" have attained a kind of mythical status about their power, and that many scientists in fields like fMRI encourage this kind of thinking (as I often see on tv or in print) when they could be more consciensous about communicating the inherent limitations.
> In any scientific experiment, you manipulate one variable and examine it's effect on some measurement
You're right, but I think that certain studies (like using transgenic mice that have certain receptors in certain brian regions deactivated) gives much clearer causative information that I would argue is qualitatively different. If other neuroscientists agree with this (and I'm not sure they do but it seems clear to me as an outsider) I wish they would emphasize these types of studies more when talking to the press instead of just showing off "pretty pictures" so much.
I have not read it yet, but it got very good reviews.
Lawrence Person (lawrencepersonh@gmailh.com (remove all "h"s to mail)
http://www.lawrenceperson.com/
That's nineteen pounds, nineteen shillings and six pence.
Predecimalisation (1971) £1 = 20 shillings 1 shilling = 12 pence.
So that's six pence short.
Bwoop bwooop bwoooop! Incoming randroid!
Ayn Rand is an interesting read, just don't take it seriously... it's some sort of overly simplistic libertarianism.
This isn't inconsistent with the idea of "how much one man needs." Indeed, with perfect information, we might be able to do better in allocating income in a more "fair" way (I'll leave it to the reader to determine what "fair" is).
Sorry, I'm not trying to be mean. In theory, this would a great way to efficiently allocate resources, assuming that we were ants or individual "cells" in some sort of overall body, similar to the Gaia planet in one of Asimov's books (why can't I remember which one?).
The problem with this idea is the same problem that exists for any kind of pure socialism. We are human beings and too many human beings are abysmally selfish.
The main problem that I have with this kind of technology is that it will be used as yet another way for people in positions of power to control other people. It is part of the perennial problem of the advancement of science. Most of the people who work to advance the overall knowledge of the human race tend to be idealists. Then, when new toys have been developed by engineers, arrogant and powerful people use them to control others or to enrich themselves, all the while thumbing their nose at the very people who helped create them. When they get their new toys, it is like giving them to a barbarian who then goes "look what Grog do with big boom-stick!"
So anyway, while it is interesting to advance the overall understanding of the mind, some people are just going to use this to make the world worse for everyone else.
Similar to the upcoming US election results
s/Neuromancer/Neurofinancer/
just something that came into mind. cheers.
SIGERR: laziness exceeds quota
and dabbling in issues related to 'neuroeconomics'.
Rest assured that fMRI is not the only that is being used. The neuroscientists I know think very little of fMRI work for all the reasons you describe. (And more: humans and other animals make decisions in a fraction of a second, which is waaay to slow for fMRI).
The other method is to actually measure the activity of neurons in animals while they make decisions. Most of the simple laboratory games of preference '$100 now or $200 in a month' can be translated into animal experiments 'one drop of juice now or two drops in 10 seconds' (Monkeys and rats tend not to look far into future as humans, i.e. they discount more.)
The cool thing is that people have been able to find neurons that represent the "absolute utility" of choices; the "relative utility" of choices etc. This way the choices animals make can be predicted with high accuracy based on neural activity. Now the question is how is 'utility' computed by the brain based on previous experiences. Neuroscience should be able to give mechanistic answers to these kinds of questions. Of course, using fMRI only will not accomplish that.
The goal is to put a solid, mechanistic foundation under "decision making" and move away from purely prescriptive or descripitve approaches used by economics today.
the laws of thermodynamics say otherwise. The first law is the conservation of energy and hence mass in most cases (i.e you can't win). If two people exchange objects nothing is magically created, there is no possiblity of a win-win situation. Existing objects have just been redistributed. The second law is the entropy law and states that on average an process will result in disorder increasing (i.e. you can't break even). Even in a perfectly equal exchange both sides will lose the time and energy necessary to make the exchange and so both sides breaking even is not possible.
However in the real world exchange only takes place where someone is going to profit and so the exchange must always be unequal with one side losing so that other can gain. The mechanism through which this is accomplished is pricing. This is possible because the real world does not consist of a number of equal players exchanging goods as modeled by economists. Instead you have most people who have only one thing to sell, their labour. By forcing the price of labour to be well below the prices of the goods that can be produced using it, systematic unequal (and therefore profitable for one party) exchange can be maintained.
In a similar way exchange between the first and third world is based on pricing raw materials, fossil fuels etc. at well below the price of goods that can be produced from them. In both cases this results in net flow of wealth from the poor to the rich which you might be forgiven for mistaking for the creation of wealth, if you are a well off person in a rich country, and you don't look too hard. You might want to check out The Power of the Machine by Alf Hornborg if you are interested in learning more.
And I'll say it again:
CHICKEN ENTRAILS.
I've heard Alan Greenspan swears by them. Anything else is just voodoo economics.
Work, buy, consume, die.
In this case, one of the consenting party is doing harm to him/herself and society while fully aware of the medical consequences.
Secondly, if free market exchange truely increase wealth for both parties, why is there the need for a huge marketing and advertising industry?
Think about perfumes. Why is one thimble $500 while another $5? The cost difference has NOTHING to do with manufacturing costs to be sure.
While there are very useful applications of the free market mechanisms, it cannot be a panacea. I recommend "Manufacturing Consents" by Chomsky for another perspective.