It's all in the mind.

March 22, 2005 8:23 AM

Neuroeconomics:"Eventually it could help economists design incentives that gently guide people toward making decisions that are in their long-term best interests in everything from labor negotiations to diets to 401(k) plans." Note the ambiguous use of the pronoun "their"--are we talking about the long-term interests of people in general or of economists?
posted by all-seeing eye dog (25 comments total)

From now on, I'll be planning my diet to benefit a secret cabal of economists.
posted by nebulawindphone at 8:32 AM on March 22, 2005

Ummm, I think the paranoia factor here is a bit high. David I. Laibson and company are basically working on extending behavioural economics -- understanding how people actually make decisions, rather than relying on the old rational choice model that assumes people are rationally maximizing benefits at every stage. The point is to understand how real behavior differs from ideal. A (simplified) example given by Laibson is to understand why people don't go to the doctor until an illness gets very bad, when it would be economically rational to get regular checkups. Or why we place more emphasis on satisfaction immediately rather than long-term benefits. If we understand how people make decisions, then we can better adjust public policy decisions to take into account the way people really work.

And if you think the economists are out to get you, you should talk to some marine biologists or cultural anthropologists. Their plans for world domination are terrifying!
posted by blahblahblah at 8:33 AM on March 22, 2005

I think that marine biologists are too busy committing suicide to worry about world domination. Now, these strange clicking noises in the 4 to 150 kHz range outside my window right now, however...
posted by DaShiv at 8:50 AM on March 22, 2005

Behold the power of the Great Invisible Hand!
posted by nofundy at 9:52 AM on March 22, 2005

No paranoia factor, really--just making a failed attempt at a joke because the use of "their" in the quoted passage really is ambiguous (in a technical grammatical sense)... Although I do find the idea of using neurologically-informed persuasion to encourage or discourage particular behaviors in the name of economic interests incredibly disturbing (for me, the idea evokes images of a school yard bully making some poor kid slap himself repeatedly in the face with his own brain until he gives up his lunch money). Who's to say what's in people's best interests or not? I mean, except in the most obvious cases (like, "Hey don't fall asleep on the railroad tracks!"). Economic interest and personal interest aren't always wedded. I remember my grandparents used to look back fondly on the Great Depression. Weirdly enough, they remembered being happier and feeling better about themselves when they were financially worse off and had to struggle to make ends meet. Nostalgia can play tricks on the brain, of course, but I still think economists (like all theorists) have a tendency to look for absolutes where there simply aren't any. And to claim that anyone can know with any certainty what's in others' "long-term best interests" is condescending and misguided.
posted by all-seeing eye dog at 9:57 AM on March 22, 2005

Why does something suddenly become news just because somebody puts the prefix “neuro-“ in front of it? This is no new information about economics that wasn’t already described by behavioral economics 10 years ago. All these people did is correlate old news in neuroscience with old news in economics and pretend like they’ve created a new field, when in reality they add no information to the overall debate. It’s the same thing that gives evolutionary psychologists a bad name.
posted by afu at 10:56 AM on March 22, 2005 [1 favorite]

I think it's naive and simple minded to think that some people don't know what is in others' "long-term best interests."

I think that certain doctors, lawyers, financial advisers, and philosophers know exactly what is in most people's long term best interests. But then, I'm healthy, not in prison, rich, and my heart is pure.

I've long wondered how we can make a science of the fact that many people are fundamentally too stupid to act in their own best interests. Although neuroeconomic modeling will help us understand how irrational motives affect judgement, it still won't help us predict which poor choices stupid people will make.

Like, for example, uh, smoking, white collar crime, not saving their own money, and lying to their spouses...
posted by ewkpates at 10:57 AM on March 22, 2005

DaShiv I'm afraid you aren't hearing the ones above 20kHz... but that doesn't mean they aren't there!

Uhh, as a student of neuroscience, I have to call pseudoscience on a lot of this... And as a student of psychology I have to disagree with the idea that basic neural factors can systematically inform higher-level economic theory, learned over a lifetime, in human behavior. Just because somebody, or a lot of people, do something irrational doesn't mean it has to be justified somewhere. Right now neuroscience is a hot topic so it's the donkey of choice on which to pin this tail.
posted by BlackLeotardFront at 11:00 AM on March 22, 2005

It occurred to me the other day that something like this might be behind the Social Security private accounts. One of the traditional power structures in American politics has been the little guy against the big guy (for example, labor vs. management). By, in essence, "forcing" the little guy to have a pile of money directly affected by the stock market, he may, to a greater degree, consider the management aspects of an issue, thus tipping the political balance more in favor of the proponents of the plan.

It's not so much about fixing Social Security; it's about enticing more people to view the world through (politically and economically) conservative eyes.
</tanget>
posted by Doohickie at 11:16 AM on March 22, 2005

Doohickie:

On a similar note, it's going to be an enormous incentive for companies involved in the forced investing not to have any sort of progressive policies for gay/lesbian employees, or healthcare plans that include paying for controversial procedures. You would either face a mass exodus of SS investors from one fund to another, or medling from Congress. Personally, I'm betting the latter.
posted by Ptrin at 11:33 AM on March 22, 2005

In neuroeconomic ownership society, checkbook balances YOU!

</Yakov>
posted by eatitlive at 11:36 AM on March 22, 2005

I think it's naive and simple minded to think that some people don't know what is in others' "long-term best interests."

Ewkpates: Despite what I said in my previous post, I don't entirely disagree with you on this point. Of course specific people in specific cases can have more insight into what others' long-term interests may be (especially if they're equipped with a broader base of knowledge in a particular field). But I doubt seriously that economists (informed by an understanding of the neurological underpinnings of economic choice or not) would be best equipped to make sound judgments about what's in an individual's best interests. More likely, such economists would favor a particular macro-economic model and then seek to "guide" individual choices in directions that result in positive outcomes as measured against whatever arbitrary performance metrics they choose to measure the success of the model by, in my opinion.

Sure, much of the science here isn't entirely new, but it certainly isn't just pseudo-science. For me, the really important point is just this: People don't make economic choices rationally. That completely razes the theoretical foundations of free market theory, plain and simple. For economists this is pretty revolutionary stuff, because the prevailing economic models (free market economic theories in particular) have always just assumed that people do make economic choices as rational agents. That's where the larger-scale benefits of the model (the "invisible hand" effect that optimizes wealth and resource distribution) is supposed to come from.
posted by all-seeing eye dog at 11:56 AM on March 22, 2005

All etc: Concur.
posted by ewkpates at 12:07 PM on March 22, 2005

I don't mean to discout the whole thing, I mean it is clear that prefrontal cortex handles decisionmaking differently from limbic areas - just that people cite fMRI studies as revolutionizing almost every field of science, just because they have a rough idea of where the activity is in the brain. Unfortunately, we still don't know enough about the brain or its relationship with human behavior to draw reasonable conclusions based on that, at least on complex things like economic decisions.
posted by BlackLeotardFront at 12:17 PM on March 22, 2005

At first glance I thought the post said "NECROeconomics."

Now that would be REALLY scary.
posted by papakwanz at 12:45 PM on March 22, 2005

I was expecting this link to be about the fact that people give more to charity if they think a photographic of an anthropomorphic robot is watching them. Which presumably is against "their" long-term interests.
via bOINGbOING
posted by Aknaton at 12:56 PM on March 22, 2005

Neuroeconomics is an awesome, fascinating area of study. Don't knock it. This artice makes it out to be just a new take on the "people are irrational!" cry, but it's much more complicated than that. The idea is that your brain draws up multiple drafts of potential actions, interests, and selves, only one of which acually gets incarnated. Within the brain, these 'potential selves' fight against one another, using political gambits, in an attempt to wrest control of the body. In other words, what goes on in your brain in order to make up your concepion of selfhood is exactly what goes on among individuals in order to make up a concept of nationhood. It sounds wild, but it's backed up by by both neurological and behavioral data, and it gives clues on how to solve all sorts of problems, including the problem of akrasia and problems of addiction. There was a great conference on this subject this last weekend in Alabama; I wish I could have gone. The best book in this area is George Ainslie's Breakdown of Will... check out his web page on Picoeconomics (micro-micro-economics... get it?)
posted by painquale at 2:39 PM on March 22, 2005

Sorry, painquale, I don't buy it. That kind of theory is totally unsupportable by real evidence. Potential selves using political gambits, sounds like id, ego, and superego to me, and that's philosophy, not neuroscience. To suggest that kind of anthropomorphized mechanism for something which is essentially a black box is folly. Sorry if I'm sounding harsh, but this kind of 'science' really gets to me when people confuse it with the 'science' that is making breakthroughs in antipsychotics and treatment for Parkinson's.
posted by BlackLeotardFront at 3:52 PM on March 22, 2005

It sounds like craziness, I agree; but there are quite a few dedicated neuroscientists on board, and it makes plenty of empirical predictions that have checked out (also, I wouldn't call it philosophy; it's really pure psychology). It's just another top-down model, without which bottom-up models would be blind. As soon as you have enough functional localization within the brain to be able to talk about what certain parts of the brain are representing, then you're going to be able to use intentional language to describe what's going on (V4's just computed color constancy, so it wants to say that the ball is red, but that's clashing with the patient's memory that the ball is green... how will this be resolved? etc). This is just another level of description.
posted by painquale at 4:33 PM on March 22, 2005

I understand where you're coming from, but I'm just extremely wary of top-down theories because they have a habit of justifying their own shortcomings and in the end stifling bottom-up research, which I don't believe would be blind without the former.
posted by BlackLeotardFront at 5:07 PM on March 22, 2005

For me, the really important point is just this: People don't make economic choices rationally. That completely razes the theoretical foundations of free market theory, plain and simple.

I know Laibson and other researchers disagree with you on this. The rational choice model is just that, a model, so it is flawed, BUT it also the best general model of human behavior in the social sciences, and explains a huge amount of group action. Laibson has argued that this is in no way a replacement, but rather a way of better analyzing the utility curve under certain kinds of decisions. In other words, it is an improvement and tweak on rational choice theory, it does not invalidate it.

As for BlackLeotardFront's point, this is extremely bottom-up, much more rooted in experimental economics than economic or neurological theory. Laibson conducts experiments on action, and then develops theories of utility maximization from there.
posted by blahblahblah at 6:35 PM on March 22, 2005

painquale: one of the most bizarre and experiences I ever had while playing around with strange and illegal fungi was a direct experience of exactly the kind of self-as-committee-meeting effect you're talking about; I've never forgotten it, and it's been incredibly useful to me in later life.

I've found that since making it conscious policy to allow the various bits of me to be what they are and do what they do without yelling at each other - and especially without the Acting Chairman going all pointy-haired and wasting energy in futile attempts to micro-manage all the other bits - decision-making (and life in general) has become much less stressful, and I have become far quicker at grasping other people's points of view.

BLF: The main place my own Internal Committee Meeting model departs from the traditional Id, Ego, Superego division is that there are many more committee members than that, their roles are far more fluid, and generally only those with specific expertise in dealing with the situation at hand will bother showing up to the meetings.

So now, having spewed forth my two cents, I'm now off to RTFA. You lot play nice while I'm out :)
posted by flabdablet at 4:31 AM on March 23, 2005

Well, that didn't say much. Those people should all use more drugs :)
posted by flabdablet at 4:34 AM on March 23, 2005

People don't make economic choices rationally.

Example form 1.5 months ago. 2 gas stations - on opposite corners of the intersection. One had gas at $2.01 the other at $2.15. Now, the $2.01 had more cars and trucks (9?), but the $2.15 store had 1 truck and 1 car filling up.

Why would you fill up at $2.15 when $2.01 was an option?
posted by rough ashlar at 4:50 AM on March 23, 2005

all-seeing eye dog ; I partially agree with you, people don't ALWAYS make economic choices rationally and they even less do so by following an economic model other then "more is better then zero".

But that doesn't raze theoretical foundations AT ALL because (as for every rational model) the fact that people don't stricly follow a model doesn't imply the model or its foundations are wrong.

That's saying..givent that people don't use the public transporation, therefore it sucks. BALONEY ! Or like saying, given that a particular newspaper isn't always bought, therefore it sux. That's bull.

Free market theory is just-a-model ..that's to say an experiment, an attempt to describe how it WOULD work if the assumptions (foundations) of the model were right. Some of the free market assumptions seem impossible (perfect information) and some highly unrealistical (perfect competition)

3/4 of population don't have a clear "picture" of the free market economic theory, just try asking around ! Yet some people bought into the "free market is better" meme which is exactly as much bullshit as "librul agenda" meme or "communism is better then capitalism" meme.

rough ashlar:
let's call the guy at the $2.15 station Joe Luser

1. Luser got a lot of money and he doesn't even bother checking gas prices (the marginal utility of a saving of 0.15 is less then going to the $2.15...why ? for instance..)
2. Luser is simply distracted
3. Luser is a friend of the $2.15 station owner
4. Luser doesn't want to cue

There are a number of - not unreasonable - choices and a number of events that could bring a person to the $2.15 stations yet not make a fool of the person. That doesn't fit well in many equations and even a stack of book of statistics can't perfectly predict what Luser will do and why and when..yet what Luser is doing (going to $2.15) isn't necessarily irrational ONLY because he goes to the most expensive station.

That's part of grocery store economics...the guys that pays less thinks that he's saving (which is usually good) and is actually spending less money...but is the thing he's buying WORTH the money he's paying ? That question is too often not asked and the answer is very long so I stop with a "tought" ...

What is water worth to the man in the desert and what it is worth to the man in the north pole ?
posted by elpapacito at 6:08 AM on March 23, 2005