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."

Comments

Re:Observing

[loose_change]

There is, in my view as a neuroscientist, a basic flaw in the premise of rationality in individual economic decision-making. Preferences are not always rational, and several studies show that short-term gain almost always trumps long-term gain, even when the short-term gain will definitely decrease long-term gain.

For example, there was a neatly done study on preferences that showed that brief exposure to an image - too short for conscious recognition or memory - would result in that image being chosen as prefered by the subject as compared to a new image. (The test images were abstract black and white, symmetrical patterns.)

Another study using a bowl in which a dollar would appear each day, and the total dollar amount would be doubled at the end of the week if the dollar was not taken, showed that people will only slowly learn not to take the dollar each day. This is especially true if it involves cooperation with other people, when everyone has to not take the money for everyone to have the money doubled.

In the first case, there's no rational choice for the preference. In the second, the behavior is clearly irrational if the goal is larger gain. Advertisers have always exploited the first case.

And this is not new. I blogged about this a year ago.

But....

[astebbin]

...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.

Be Skeptical of Conclusions Drawn from Brain Scans

[smug_lisp_weenie]

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.

Re:Simillar business models already in use.

[Anonymous Coward]

Wonder how they figured this out without brain scanning? :)

Funn y you should ask that...

It's the Time Value of Money Theorum in finance, taught in any fundamentals of finance class. It's a fascinating idea that leads nicely into the oportunity cost(the cost of not doing something) lecture.

Re:Be Skeptical of Conclusions Drawn from Brain Sc

[Anonymous Coward]

I AM A neuroscientist
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.