No Sidewalks: The Road to Neuroeconomics at the Opera House

A preface in which our narrator peers into the umbilicus

Dr. Norbert Manchego told me at a graduate school interview that my intention to become a social neuroscientist was a trendy decision driven by internet-hype, and that the questions I professed interest in would be better addressed by a neuroeconomics approach. More than a little taken aback by such a bold assertion, I would never have believed that in a little over a year, I would count Manchego as one of my favorite contemporary scientists. I shrugged the professor’s words off as the product of overzealous allegiance to his discipline, as I had already all but decided to accept an offer in a social neuroscience lab.

During the spring of my first year of grad school, a second professor decided on my behalf that I wanted to study neuroeconomics, but this one had the power to forcibly enroll me in a seminar on the topic (despite my tactful yet explicit protest). While the addition of a third course to my already overfull plate made for an overwhelmingly hectic term, it resolved any lingering confusion as to why Manchego thought he knew better than I did what I wanted to study. He was mistaken about the roots of my interest in social neuroscience (I first read of the field as a freshman in college in a journal article given to me by my uncle, although I was largely ignorant as to its nature until I read a textbook pilfered from the trunk of a friend [and, oddly enough, future labmate]), but he was on the money in his assertion that neuroeconomics paradigms are an ideal tool for asking questions about the means by which brains of distinct organisms operate in concert.

When the good Dr. Cummings prevailed upon me to write something for Tropics of Meta, I was almost immediately certain that neuroeconomics would be the focus of my post. After a dozen pages full of more false starts than a kindergarten swim meet, I realized that I was incapable of writing something that was simultaneously short, sweet, and remotely innovative on the topic. Instead, prepare yourself for what will assuredly be nothing short of an orgasmic scientific thrillride, divided into multiple installments as determined by the lyrics of The Olivia Tremor Control:

Neuroeconomics at the Opera House:

Part I: Historic Properties

Eager as I am to dive right into the brain, a brief look at the economic historical antecedents of neuroeconomics is in order. If you’re a neurd (like I am) or are already familiar with some of the basic principles of economic decision-making, please sit tight for the next installment in which we put the neuro in neuroeconomics. On the other hand, if this is new to you (or if you need a quick refresher), fire up your imagination for this truly mind-blowing hypothetical situation:

Say you find yourself in a coin-flip situation where you have the chance to win some money with no risk of losing any. Which of the two payoff schemes would you prefer?

A. Heads: $10, Tails: $10

B. Heads: $20, Tails: $0

Blaise Pascal (remembered by mathematicians for his famous triangle and forgotten by junkies for inventing the syringe) claimed that there is essentially no difference between these scenarios, because the expected value of both outcomes is the same. Expected value is equal to the potential gain conferred by a decision and the probability of receiving that gain, stated mathematically as EV = G * p(G).

In our example:

EV(A.) = $10 * (1) = $10

EV(B.) = $20 * (.5) = $10

This formula represents the first normative model of human decision-making behaviors, but its failure to accurately predict the choices that people actually make was noted early on by Bernouli, another mathematician (famous for deriving the physical principles that explain the properties of Frisbees). What he pointed out was that the 50% chance of winning nothing makes option B. far less attractive to someone who is flat broke and hasn’t had a bite to eat in three days (and thus values a guaranteed $10 more highly) than to someone with a belly full of caviar and a wallet full of cash. Bernouli proposed that rather than considering expected value to predict behavioral choices, one should instead consider expected utility, which accounts for different subjective preferences across individual decision-makers based on dispositional and situational factors. Somewhat confusingly, the words “value” and “utility” are often used interchangeably in the literature, but it can be safely assumed that, unless otherwise stated, any reference to value implies that it is subjective value (which is essentially the same as utility).

Neoclassical economics is based on rational choice theory, which relies on the assumptions that individual preferences are rational, that such preferences can be mapped onto objective values, that people are self-interested, and will consistently make decisions based on mathematical calculations of the expected utility of each choice. In 1953, Maurice Allais threw a wrench in the works of this notion at an economics conference with an experiment demonstrating that even professional economists consistently violated expected utility theory when presented with a series of similar, but slightly more complex hypothetical choices. Followed by a swath of behavioral observations of decision-making behavior that could not be explained by rational choice models, neoclassical economists were forced to draw one of two conclusions:

A. expected utility theory only applies to certain situations (implying a so called “bounded-rationality”)

B. people are just bad at maximizing utility

One way that economists have sought to account for the inconsistency between normative models of rational choice and descriptive accounts of observed human decision-making was by suggesting that choices are actually determined by multiple systems that determine behavioral outcomes. In what is referred to as a “dual-process model,” it has been suggested that human decisions are guided by two broad mechanisms a slow-acting “cold,” cognitive system, rooted in recently evolved cortical structures that carry out rational calculations of which we are consciously aware and a fast-acting “hot,” affective system, based in evolutionarily older limbic structures that induce objectively incalculable emotional states. Such dual-process models for economic decisions also require a mechanism that integrates the output of rational and irrational systems to calculate the value/utility by which actions are ultimately chosen.

Since the late 19th century, economists have pined for what Francis Edgeworth referred to as a “hedonimeter,” a machine that would allow researchers to index value based on physiological signals. With this sort of tool, differences in individual preferences could be rationally explained by variability in objectively measurable, biologically determined correlates of value. It should come as no surprise, then, that many economists regarded the advent of neuroimaging in the early 1990s as the holy grail for which they had searched for more than a century.

Next time, fMRI and the quest for a hedonimeter in Part II of Neuroeconomics at the Opera House:

We feel ok, which is how we feel, most of the time now

Guest science correspondent Ricky Nickles is a doctoral candidate in psychology at an educational establishment somewhere in America.