gay science

The gay science

Over the centuries since Adam Smith, economists have developed

mathematical frameworks for maximizing economic success. However,

despite the intellectual power of these theories and the often simple

logic involved in their calculations, humans continue to amass credit

card debt, default on loans, fail to save for retirement, and on the

whole refuse to do what these rational, reward-maximizing equations

tell them to do.

The irrationality of human decision-making attracts the fierce

interest of two very different fields: neuroscience and economics.

Economic theories of human decision-making are essentially based on

two parameters: what something is worth and the probability of its

occurrence. Neuroscientists, on the other hand, think of

decision-making as a product of physical neural circuits: sensory

information enters the brain, journeys through the brain where a

decision is "made," and eventually exits the brain to evoke bodily

responses. Economics ignores these biological, more proximal roots of

behavior, whereas neuroscience ignores the economic goals that

ultimately guide our decisions.

These two approaches have recently been integrated in the hybrid field

of neuroeconomics. Neuroeconomics attempts to unify abstract economic

variables with neuroanatomy, and thus understand the physical

mechanisms by which our brains make decisions. The basic premise is

that somewhere along the sensory-motor circuit are the neural

substrates that represent "value" and "probability." These areas must

interact and influence the flow of information along the circuit,

thereby prompting a certain decision and its subsequent behavior. The

most pressing questions, then, are how and where these abstract

variables are combined in the brain, and the dynamics of the neural

computation which engenders a "decision."

Inherently, neuroeconomics is not a means to exploit the free market

by, for example, scanning the brains of consumers to calculate the

maximum price they will willingly pay for a good. Although such

endeavors are opportune beneficiaries of this sort of research, I

believe neuroeconomics to have grander, more noble intentions. As a

neuroscientist, I view neuroeconomics with bright, hopeful eyes, eager

for the insight that economics can lend the neurobiological study of

human behaviors. Although the former "dismal science" is abstract and

far removed from biological mechanisms, it offers one thing behavioral

studies tend to lack: great mathematical beauty.

Because economists base their models on optimal behavior, they have

the ability to develop a precise, unified framework for interpreting

human behavior; the thesis is, essentially, that humans choose

alternatives that maximize rewards. Neuroeconomics draws upon the

precision and rigor of the formal models of economics to go beyond the

sensory-motor circuit, allowing opportunities for understanding the

neural basis of more abstract economic ideas, such as value and the

profitabilities of outcomes (a bit more challenging to study than

sensory and motor systems). Thus, the principles of economics allows

neuroscientists to explore the physical mechanisms underlying high

level cognitive processes.

Particularly intriguing subjects for these studies are human choices

that violate simple logic,; those which are neither selfish nor

generous but blatantly, unbiasedly, irrational. I've previously

explored irrational behavior in my post on risk aversion; another

interesting example is "time inconsistency." When people make

decisions about the distant future, they tend to behave as rationally

as economic equations dictate. In contrast, when faced with the same

decision relating to the near future, they are reckless and impulsive,

unwilling to delay gratification. For example, when people are offered

the choice of $20 now or $22 in a month, they often choose to receive

the smaller amount immediately. However, if given the choice between

$20 in a year or $22 in a year and one month, they will choose the

higher, delayed amount. This is irrational; in both situations, the

time delay (1 month) and financial gain ($2) are equal, so the

decision should be the same (the higher amount should always be

chosen.)

Another example of irrational impulsivity is less quantitative than

the above, but involves a more flagrant demonstration of vice versus

virtue. If offered the choice of a chocolate bar now or an apple now,

most people demand immediate gratification and will choose chocolate.

But if offered to receive a chocolate bar in one week or an apple in

one week, people will consider the long-term effects of each and

prefer the apple.

Back in 2004, Jon Cohen, Director for the Study of Brain, Mind, and

Behavior of Princeton University, teamed up with George Loewenstein of

Carnegie Mellon to take a neuroeconomic approach to this perplexing

behavior. Using fMRI, they searched for changes in brain activity as

the subjects made decisions between small immediate rewards or larger

delayed rewards, attempting to link irrational displays of

time-inconsistency with brain activity. The results, published in

Science, suggested that decisions involved with the possibility of

immediate reward activated the limbic system, which is associated with

emotion, while both short- and long-term decisions activated the

prefrontal cortex (PFC), associated with logical, abstract reasoning.

Interestingly, when students had the choice of an immediate reward but

chose the larger, delayed option, the PFC was more strongly activated

than the limbic system. In contrast, when they chose the immediate

reward, the activity of the two regions was similar (with a trend

toward more activity in the limbic system.) This data suggests that

both systems are involved in the neural representation of "value," and

that the decision-making process is guided by, as the authors state

rather poetically, "a competition between the impetuous limbic

grasshopper and the provident prefrontal ant within each of us."

Thus, by exploring the neural processes by which the brain generates

economic decisions, the authors were able to gain insight into the

circuit-level computations that may govern complex behaviors. The

extent to which the computations of economic theory can truly be

generalized to the computations performed by the brain (as well as to

more complex decision tasks) is unknown, but the aims and progress of

this field are promising. From the economist's point of view,

neuroeconomics may be far "messier" than economics, but the

theoretical analysis of what humans should do isn't, to me, nearly as

fascinating as understanding what they actually do, and neuroeconomics

brings us far closer to reality.