The first OpenSimulator community conference was held entirely on an OpenSimulator grid this weekend. The link for the conference is here. The talks were given by a whos who in the OpenSimulator community. You can still listen to the talks by going here. OpenSimulator is an opensource version of SecondLife and as such gives users more control. For us here at the CSN it means we can more easily build and run immersive economics experiments, but the range of applications, both potential and realized, is huge. Virtual worlds have lost some of their early hype but have found some niches, and as the conference so readily suggests the niches will grow, the technolgy will improve, and virtual wolrds will continue to transform our lives.
Having started my career as an experimental economist I probably have a little different, but I hope complimentary, perspective on behavioral economics and other experimental programs in general.
I view the difference between experimental and behavioral economics in terms of (1) what is studied, and (2) how it is studied. Experimental economists are interested in institutional and organizational rules and how these rules affect both, the joint behavior of participants, and the outcome generating, or process, performance of the institutional rules in question. To study this the experimental economist induces preferences and implements a microeconomic system. One major problem for this approach is that 'risk preferences' are very noisy, when induced, due either to, the added complexity imposed on subjects of having to work with induced preferences, or that the induced preferences conflict with a subject's actual preferences. A second major problem with this approach is that institutional rules that are isolated in the lab often depend on on additional rules that are not being studied, or social and cultural norms that are not present in the lab. Experimental economists have learned to manage these problems and many interesting research papers have been produced.
Behavioral economists are interested in individual behavior, whether it be individual choices, strategic decision making, or competitive strategies in markets. The behavioral economist does not in general induce preferences, but does often use salient rewards in a well defined decision theoretic problem defined by decision theory, game theory, or price theory. As a consequence of not inducing the behavioral economist is interested in the nature of preferences, and the nature of decision making. One major problem for this approach is that preferences and decisions interact, and it is often not clear whether one is studying the former, the later, or a combination of both. A second major problem with this approach is that behavior observed in the lab may not capture the full computations that people are capable of making when augmented by technology and institutions. But again, behavioral economists have learned to manage these problems and many interesting research papers have been produced.
When I refer to experimental economists, or behavioral economists, I am referring to a researcher employing a specific methodology to explore a specific class of problems. So, in my experience, there are many researchers who employ more than one methodology, and this has proven to be very useful. But now I can be more specific, thus narrower, and I'm sure subject to more debate. Lets hypothesize that experiments are all about exploring the computations that humans make. Under this hypothesis both experimental economics and behavioral economics are methods for exploring computational mechanisms. In the former case institutions are mechanisms than make computations, and in the later case individuals are mechanisms that make computations, but in the end we will want a computational theory of economics that includes both. I think this is where we are heading and when I look at some of the most promising experimental programs including economic systems design, which seeks to engineer better institutions, and neuroeconomics, which seeks to understand the computations occurring in embodied brains, it seems that the computational hypothesis is one that will best integrate the different experimental methodologies and best serve to move experimentation forward.
This raises the question, should we use experiments to study the law? By my hypothesis anything computational can be studied experimentally, and in legal institutions and in legal decision making many interesting computations are made. This suggests that we could use experiments to study the law. The downside of course is that our experiments could mislead us, but and source of data could mislead us. In its favor experiments invite a form of structured debate that is almost impossible to have without them. In particular, if I don't like your experiment, then I'm free to run my own counter experiment, and as long as both our experiments replicate, a good theory should be able to explain both results and lead us to a better understanding of the mechanism in question. If we agree to the theory but are still hesitant to apply our knowledge to the field we are now in a better position to design, and run, a field experiment that can help us decide.
Over the summer, two of the CSN interns (Phil and Matt)
built the Makerbot CNC Cupcake and wrote an operations guidebook. It is a small part of a greater research
project and now that the interns are gone someone needs to figure out how to
make it work. That would be me. The plan is to review the installation to
become familiar with all the parts, print some generic geometric shapes, devise
a maintenance schedule and update the operations guidebook. It should be fun.
As far as I know Elinor Ostrom has never run a neuroeconomics experiment but her research is likely to be of interest to neuroeconomists. Her research on how groups govern the commons is multidisciplinary including extensive field research, economics experiments (with James Walker), and game theory (with Roy Gardner). In outlining the design principles (slide 22) of successful institutions for governing commons, Professor Ostrom includes the ability of members to monitor other users and resources. This is interesting because Ostrom shows this is important for harvesting social rewards, but monitoring the environment is also important for the harvesting of private rewards (See Read Montague and Brooks King-Casas in TICS, 2007, here.). There is now doubt that social monitoring is important to know who to punish (and reward), and that people are keenly aware of the potential for being monitored, but this neural network is likely to be far more interesting in that it allows us handle small social defections before they become big ones, and it is this feature that allows a group to maintain their common agreement and behavior.
Recent articles in the front page of the Washington Post 8/22/2008 and the Business Day section of the New York Times 8/20/2008 both are talking about paying students to perform. So results so far in NY to incentivize performance on AP exams are mixed. I suspect there is not too much surprise there. It looks like the incentives were offered after students had chosen to take the classes and they get paid once. I remember this was an old debate when I was in graduate school between economists and psychologists on this topic. Economists want to design incentive compatible mechanisms that either use selection or shift goals to improve performance. Psychologists wonder how this affects the incentives that are already in play. Well recently there has been a lot of attention on this using contingent management mechanisms to treat addictions. A nice article by Higgins and Petry looks at alcoholism. In these contexts paying people to stay sober and attend meetings seems to work. I thank Warren Bickel for introducing me to this research a few years back. In some ways the DC program looks more like contingent management paying students for attendance as an attempt to reinforce good behavior. This is an important element that has been mostly lost on economists. That frequency of reward matters. They get the contingency part. But more important, once you get kids in school what do you do with them? If they aren't engaged how has this helped much? In fact they may quickly learn in school strategies that are more rewarding than paying attention. I like the quote by Benjamin Franklin that sits in my office. "Tell me and I forget. Teach me and I remember. Involve me and I learn." So this raises a nice question how is involvement reinforcing? So in the end I think both economists and psychologists need to work together on this one. Contingent management, or monetary incentives, can help fix incentives in the short run, but involvement fixes them in the long run.
A google search inspired by this article in Science Careers on non-academic careers for behavioral scientists led me to this link about internships at Fidelity Investments's "Center for Applied Behavioral Economics"(no link)...
"Candidates pursuing doctoral or post-doctoral studies in decision
theory, cognitive psychology, and/or economics are encouraged to apply."
The posting was at the end of March, but you never know, there may still be an opportunity for a budding neuroeconomists to break out that suit and tie that's been collecting dust for so long.
A new single-cell firing study from MIT observes prefrontal activation to assign salience to novel stimuli, and parietal activity to draw attention to stimuli already recognized as salient. What I'm more excited about, is their discussion of neural synchrony as a conduit of information.
This review article from last fall provides a nice overview, and I've been seeing it crop up more and more. Unfortunately fMRI is too slow to capture this information; the review discusses EEG studies in humans. Perhaps it is time to start thinking about this signal domain and its application to neuroeconomics.
Night Live may be in the midst of a prolonged rough stretch, Debbie Downer is
one of my all-time favorite characters (see a video
or the Wikipedia
entry). For those who are unfamiliar,
the central figure in these sketches is a miserable cynic who constantly rains
pessimism on others’ parades. A recent
study, published in NeuroImage,
examines if this type of behavior has neural underpinnings:
Based on the assumption that
information processing is biased towards potentially negative events in order
to prepare response strategies efficiently for coping with unfavorable
consequences, we hypothesized that emotion processing brain areas are activated
during ‘unknown’ expectation which are also activated during expectation of
Here is the authors’ main result:
Taken together, we found evidence
for a ‘medial-thalmic-insular-inferior-frontal-rubral’ circuit associated with
expecting events of unknown emotional valence, the activity of which resembled
the expectation of negative events and also correlated with individual
depressiveness. The revealed areas are
consistent with the proposed ‘ventral system’ of emotion processing for
identification of the emotional significance of a stimulus, production of
affective state, and autonomic response regulation…Our results are consistent
with the view of brain activity reflecting a ‘pessimistic’ or ‘cautious’ bias
toward future events.
Apparently, we’re all wired to be downers in a world characterized
by pervasive ambiguity. Somewhere in the
course of human evolution, though, people’s views toward their pessimistic peers
have changed – whereas downers of the distant past likely served to possess and
distribute valuable information, they’re a drag in 21st-century America. What used to be an advantageous survival
strategy is now, at least in well-off societies, a social nuisance and an
object of mockery. Is this transformation not a testament to how well off we have become?
Whereas neural responses to self-judgments in
the …MPFC ROI…approximated a baseline level of MPFC activity, neural responses
to intimate other- and non-referential-judgments were significantly deactivated
relative to baseline.
The present results indicate an MPFC response
that is self-specific – namely judgments pertaining to oneself were seen to be
distinct from those made for one’s friend.
In the February 1, 2007 edition of Neuroimage, Zhu, Zhang, Fan and
Han question whether the self-other neural differentiation is culture-specific:
Social psychologists have found that Westerners
(North Americans and Europeans) tend to view the self as an autonomous entity
separating from others and to behave according to their own internal attributes
and thoughts (the independent self). In contrast, East Asians emphasize the
interconnectedness of human beings along with contingencies between the
individual’s behavior and the thoughts and actions of others in the
relationship (the interdependent self). However, it remains unknown how the
cultural influence on self-representation is accomplished in the human brain.
Whereas the Heatherton experiment recruited subjects solely
from the Dartmouth area (justifiably with no mention of nationality), Zhu et al
scanned both Western (6 English, 4 American, 2 Australian and 1 Canadian who
all were living in China for less than a year) and East Asian subjects in their
laboratory in China. Here are their
In Chinese individuals,
mother-judgments generated enhanced MPFC activity compared with other-judgments
and the null condition. Consequently, the representation of Chinese mother
cannot be distinguished from the representation of their selves, in terms of
the MPFC activity, indicating that Chinese individuals use MPFC to represent
both mother and the self. In contrast, MPFC activity corresponds to a
representation of only the individual self in Western subjects.
And here’s the associated implication:
These fMRI results showed strong
empirical evidence that MPFC mediates cultural influence on the neural
substrates of representation of self and close others. While social psychological
studies suggest that cultures create habitual ways of processing information
related to the self and one’s important others, our fMRI results indicate that
these habitual cognitive processes are accompanied by detectible parallel
neural processes. The relatively heavy
emphasis on interpersonal connectedness in Chinese culture has led to the
development of neural unification of the self and intimate persons such as
mother, whereas the relative dominance of
an independent self in Western cultures results in neural separation
between the self and others (emphasis mine).
But when one takes a multidimensional view of culture, the
results of this study open more doors than they close: the “something” that
generates “relatively heavy emphasis on interpersonal connectedness in Chinese
culture” and the “other thing” that generates a “dominance of an independent
self in Western cultures” remain obscured whenever we let the assertion that
“culture matters” end the debate. Given
that it undoubtedly matters, what does culture actually mean?
Consider the issue of scope. To what extent do individual components within the East Asian environment
(i.e. family, teachers & peers) separately contribute to the development of
the interdependent self? Alternatively,
to what extent is the phenomenon driven by the gestalt of East Asian life? Alterations of the Zhu et al study could
address these questions. If the
experiment was replicated with second-generation Asian Americans, maybe the
family-effect could be isolated from the societal-effect. Likewise, the school-effect could be examined
by scanning Western subjects who attended Asian schools all throughout
childhood. Would the results show that
culture is represented by a continuous spectrum – anchored by independence and
interdependence at the poles – on which Asian Americans and Americans in Asia can
be placed somewhere in the middle? Or
does some type of tipping-point phenomenon cause one culture to win out over the other, placing the imaging data toward one of the
Experiments could certainly shed light on whether the
culture-as-a-catchall view needs to be replaced. As knowledge, imaging technology and
experimental techniques evolve, perhaps (1) the specific inputs to various
cultures can be formally defined and (2) the neural processes that underlie these
separate inputs can be illuminated. An understanding of how cultural elements affect brain activity might go a long
way in explaining why given institutions succeed in one culture while they fail
Yahoo has clips from a recent 60 minutes special posted online on using propanolol to 'weaken' the memories associated with highly stressful events. Propanolol is a beta blocker, and epinephrine is a beta agonist. All sorts of beta receptors in the amygdala, which is the next door neighbors with the hippocampus; presently thought of as the seat of memory.
If you're teaching a psychopharmacology class, here's another chance to show a movie in class. Another popular take on the article is here, and the published article in Biological Psychology is here.