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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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"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.
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
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 :-)
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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.
Isn't greed and need a reletive term though? I mean, if a person wants a certian price for an item and the other person is not wil to pay that price, you can have many diferent circumstances that would call greed inot play or keep it from comming up.
If you have a widget and are asking for $2.00 for it and i refuse to buy it at that price, one could say that your greed stoped me from buying it. Or that my greed stoped you from selling it to me.
Now what if the reason it costs $2.00 is because thats what it cost you to purchase it and you are passing it along to me as a favore. You have basical absolved the greed from your part. Now lets assume that i only have $1.00 and can afford to pay you the $2.00 and that is why i decided not to buy it from you. I have efectivly removed the greed from my end too.
The answer to "how can the greedy be phased out" is they cannot without brainwashing everyone into thinking the same thing.
The answer to how much does one man need is is also reletive. The poor in the US seem to find enough money to smoke cigeretes, become out of shape and obese/over eat, or drink alcohol or do drugs. (i know not all of them but alot have at least one of these vices) Compare this to the poor in other third world counties and you will get a different picture. Again it is reletive. Untill you can brainwash every one into thinking the same thing or remove thier freedom, they will always need more or less depending on thier enviroment and expected lifestyle.
Independent thought is the problem here.
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).
well, there's a bit of a dramatic oversimplification...
while it is potentially true that free market exchanges benefit the two consenting parties (although this is not always the case, especially where highly inelastic goods and services are involved. think: crack dealer) there is often a strong negative effect on non-consenting third parties.
these by-effects of free marketism are called "externalities". for those of you who slept through econ 220, the technical definition of an externality is "when the actions of one agent (in a free exchange) affect the interests of another agent other than by affecting prices".
the classic example of an externality as posited by milton friedman is that of the company with the smoke stack that dirties someone's shirt downwind. the owner of the shirt must pay for its cleaning and that cost is not borne by the factory owner. it's freebie. we've see a lot of externalities in the modern "free market" economy, the most obvious ones being environmental: ie, the chemical company that dumps its waste into the river for "free".
of course there are tonnes of other externalities in the modern economy. the wiki page on it is here but you'll need to have been awake for econn 220 to grok it.
bottom line: saying that a free market transaction benefits both parties is an oversimplification and does nothing to contribute to a meaningful debate on economics.
2 1337 4 u!
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.
It is called time preference, but the expectation of inflation doesn't explain it.
For $100 today to be worth more than $115 a week from now, you'd have to have %100,000 annual inflation, which is well outside the expectation of Americans.
And if you adjust all the numbers in question for 10% inflation, for instance, people would then be choosing between $100 today and $115 in a week; and between $91 a year from now and $105 in a year and a week (rounding off the pennies). The rational choice would be to prefer the larger amount in each case; in fact people prefer $100 now to $115 in a week, but would presumably still be indifferent between the $91 and the $105, or if anything prefer the $105.
In considering the more distant future, then, people make more obviously rational decisions, taking the inflation rate into account. But in considering the immediate future people put an apparently irrational premium on having cash in hand.
A number of papers have been written on why this kind of time preference might have been selected for under the circumstances man evolved in; the idea is roughly that "a bird in the hand is worth two in the bush" is a good rule of thumb for hunter-gatherers. See Evolution and Human Nature (pdf) from the Journal of Economic Perspectives, for instance.
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.
Yep. It was some five or six years ago that the incoming pollution from Asia reached significant levels on the North American West Coast -- I recall the calculation at the time that all the "clean air' steps then planned would be about enough to break even, given the level of pollution coming in from Asia.
n sf c-nsd121404.php
... abstain from expressing serious concern about the splendid isolation in which academic economics now finds itself?" Wassily Leontief, Nobel laureate (Economics), 1982
That's a lot of dirty shirt.
http://www.eurekalert.org/pub_releases/2004-12/
Ask a biologist what happens over time -- the diversity of life tends to increase, despite catastrophes. And even beyond this one planet, barring choking ourselves to death before we do.
Ask an economist what happens over time -- "In the long run we are all dead." John Maynard Keynes (1883-1946), British economist.
An ecology is a set of 'transactions' that benefits the participants. An economy is not necessarily mutually beneficial.
The confusion is that it's a free ecology -- not a free market -- that's the source of wealth.
And an ecology grows only at a certain speed -- roughly three percent per year, say. Any 'economy' that claims to be growing faster is doing so by burning its wealth, liquidating the source of future growth.
"The ruling passion of the age is to convert wealth into debt in order to derive a permanent future income from it" in the illusion that "people can live off the interest of their mutual indebtedness." Frederick Soddy, 1926
"How long will researchers working in adjoining fields
So they're using brain scans to try to figure out why people don't think like economists. It's because they don't think in isolation, and there are other transactions than financial ones. It's because the relationship, the ecology - not the economy - is the ground from which people grow.
Common misconception there, but economics is not about money. Business is about money. Economics is about scarcity and how to make decisions to deal with the problem of scarcity. It just happens that money seems to be one of the scarce things everybody cares about. Anyway, you don't go into econ to become rich, that's what business majors are for. Econ majors are just applied logic geeks.
Two glaring errors in this sentence. First, when you say "free ecology" in that context, it's free as in beer, while the market is free as in speech. Second, having a free ecology isn't the source of wealth. You are certainly not free to pollute as much in Finland, for instance, as you are allowed in China, but Finland is by very far the richest country of both. Even exporting polluting scrap to other countries is tightly regulated by Finnish law, yet it manages to be one of the most competitive economies in the world.
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.