Adonis Diaries

Neuro-Economics or homo economicus? (2010)

That’s correct.  It is no longer micro-economics, macro-economics, classical economics, or market economics. 

Two distinct disciplines realized that the time has come to combine their fields of interests into a new “scientific field” that they named Neuro-economics.

Economists were working on customer behavior (for example, how a competing product can acquire market share by evaluating combinations of quality, durability, price, flexibility, availability of affordable spare parts, repair facilities, guarantees, loaning facilities, perception of the external characteristics, varieties in color, and on.

A new breed of psychologists, sometimes called neuro-scientists,  are enamored with the technology of magnetic resonance imaging (MRI) that show brain activities in reaction to a behavior, and they receive ready funds to study economic factors on people behavior.

Neuro-economics is the study of people behavior related to economic games in experiments; it is interested of discovering how cooperation among team player, confidence, equity perception, justice, and punishment affect profitability and trading relationship. For example,

1. there is this game labeled “ultimatum”; you have two partners A and B starting each with a sum of money, say $10.  A offer B a sum of money; B can refuse and both lose the game;

2. B can accept and they continue the game with more complex rules.

MRI can predict B reactions; there is a section in the brain related to “disgust” that will light up when B has decided to refuse the offer.

There is another section in the brain related to “satisfaction” that will light up, especially when alternatives to punish non-cooperating partners are included in the game.

Another example,

If A has total confidence in his partner B then he may give B all his money. B receive five folds the sum that he has.

Theoretically, both partners have a joint account of $50 by simply showing confidence.  B can reciprocate confidence or do business solo with $50.

Well, these sort of games…  They are just psychological games with economic incentives.

Now, suppose the experimenter tell the subjects that whatever money being circulated are real money and they can keep them after the game , do you think previous behaviors will alter?

I bet they would, but experiments never mention this major defect in their game procedures.

For example, in the game of confidence, if money is not for the keeps then partners should logically proceed with total confidence and amass tons of money by reciprocating total confidence; that should be a silly game if the goal is to win just the game.

Actually, all normal teams will behave the same behavior and nobody will ever win.

Now, if money was to be retained as cash after the game then interesting and varied behaviors will be witnessed.

I lean toward the conjecture that subjects are told that the money is for real and for the keep, but this fact is never stated in research papers.

Otherwise, scientists will be chastised as encouraging gambling; possibly a few partners will be using physical means to get their share if they lose, and liability suits will flood and wreck the department.

I suggest that losers in the games be compensated with real money after the experiment: you don’t want experiments to be sources of animosities among subjects.

My hypothesis is that if real money reaches the level of hundreds of dollars then the experiment with MRI will become totally non-informative: the brain will emulate Time Square on New Year Eve, and every kind of human emotions in the subject will want to participate in the experiment and react with powerful activation.

Neuro-economics has demonstrated that the brain readily recognizes a valid currency, like the defunct Franc from the new Euro currency. How so?

The brain process money as real object and not a cultural abstraction.  Interesting results with no practical application; just another proof that homo sapience preceded homo-economicus.