Neuroeconomics

OpenSimulator Conference

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.

Behavioral Economics an Idiosyncratic Perspective

This blog appeared in http://truthonthemarket.com/free-to-choose-symposium/ a blog symposium on law and behavioral economics.  It was interesting to participate.

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.                   

Cupcake 3D Printer - Day 1

 
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.

Elinor Ostrom and Neuroeconomics

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.

Schools Using Money for Incentives

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.   

Internships for Neuroeconomists?

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.

As a side note, a note on Brian Knutson's recent Neuron paper (along with his smiling mug) is mentioned in the adjacent article on neuromarketing.

Neural synchronization: what information is fMRI missing?

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.

Ambiguity and Pessimism Bias

Although Saturday 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 negative events.

 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 21^st-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? 

Neuroscience and Culture

The initial edition (June, 2006) of Social Cognitive and Affective Neuroscience included a paper by Heatherton, Wyland, Macrae, Demos, Denny and Kelley that uses fMRI to differentiate the neural representation of oneself from that of one’s best friend: 

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.

Therefore, 

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 results: 

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).

In terms of the mainstream “catch-all” view that culture is “the sum total of ways of living built up by a group of human beings and transmitted from one generation to another,” these results certainly speak for themselves: something about being born and raised within an Eastern Asian community causes an individual’s neural representation of himself to parallel the neural representation of an intimate other.  

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 poles? 

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 in others.

Beta blockers also block memories

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.