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Neuroeconomics: Biotech Meets Economics
Posted by
michael
on Sat Jan 15, 2005 10:03 PM
from the neuromancer dept.
from the neuromancer dept.
grimiore1 writes "The Economist has a story today introducing the concept of Neuroeconomics, which uses brain scanning technology and neuroscience to create new economic models and theories."
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gah.. (Score:3, Insightful)
How can the greedy be phased out? How much does one man need?
Re:gah.. (Score:5, Insightful)
This isn't inconsistent with the idea of "how much one man needs." Indeed, with perfect information, we might be able to do better in allocating income in a more "fair" way (I'll leave it to the reader to determine what "fair" is).
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Re:gah.. (Score:5, Insightful)
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Re:gah.. (Score:4, Interesting)
If you have a widget and are asking for $2.00 for it and i refuse to buy it at that price, one could say that your greed stoped me from buying it. Or that my greed stoped you from selling it to me.
Now what if the reason it costs $2.00 is because thats what it cost you to purchase it and you are passing it along to me as a favore. You have basical absolved the greed from your part. Now lets assume that i only have $1.00 and can afford to pay you the $2.00 and that is why i decided not to buy it from you. I have efectivly removed the greed from my end too.
The answer to "how can the greedy be phased out" is they cannot without brainwashing everyone into thinking the same thing.
The answer to how much does one man need is is also reletive. The poor in the US seem to find enough money to smoke cigeretes, become out of shape and obese/over eat, or drink alcohol or do drugs. (i know not all of them but alot have at least one of these vices) Compare this to the poor in other third world counties and you will get a different picture. Again it is reletive. Untill you can brainwash every one into thinking the same thing or remove thier freedom, they will always need more or less depending on thier enviroment and expected lifestyle.
Independent thought is the problem here.
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Re:gah.. (Score:4, Insightful)
To hit specifically on your greed argument -- exchange that does not happen is not welfare-enhancing becasue there is no exchange. Unfair exchange can be (and likely is) welfare enhancing, but not to the same degree that fair exchange is. A greedy transaction is a transaction nonetheless.
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Re:gah.. (Score:2)
The most interesting part about this is that this is much like a moving target. As soon as you define a new set of standards, the same clasification or catagories can be reaplied with almost the same arguments.
Take the lower class income people. If we gave everyone in the word 1 milion dollars and it actually had the same value as 1 million dollars does today, we would be elevating the world past the middle clas
Re:gah.. (Score:3, Insightful)
The win-win of free market exchanges increase global wealth. It is kind of amazing when you think about it. But it explains how humanity went from berries and stones to computers and space ships.
Re:gah.. (Score:5, Interesting)
well, there's a bit of a dramatic oversimplification...
while it is potentially true that free market exchanges benefit the two consenting parties (although this is not always the case, especially where highly inelastic goods and services are involved. think: crack dealer) there is often a strong negative effect on non-consenting third parties.
these by-effects of free marketism are called "externalities". for those of you who slept through econ 220, the technical definition of an externality is "when the actions of one agent (in a free exchange) affect the interests of another agent other than by affecting prices".
the classic example of an externality as posited by milton friedman is that of the company with the smoke stack that dirties someone's shirt downwind. the owner of the shirt must pay for its cleaning and that cost is not borne by the factory owner. it's freebie. we've see a lot of externalities in the modern "free market" economy, the most obvious ones being environmental: ie, the chemical company that dumps its waste into the river for "free".
of course there are tonnes of other externalities in the modern economy. the wiki page on it is here [wikipedia.org] but you'll need to have been awake for econn 220 to grok it.
bottom line: saying that a free market transaction benefits both parties is an oversimplification and does nothing to contribute to a meaningful debate on economics.
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Re:gah.. (Score:2, Interesting)
That's a lot of dirty shirt.
http://www.eurekalert.org/pub_releases/2004-12/ n sf c-nsd121404.php
Ask a biologist what happens over time -- the diversity of life tends to increase, despite catastrophes.
Re:gah.. (Score:4, Interesting)
Two glaring errors in this sentence. First, when you say "free ecology" in that context, it's free as in beer, while the market is free as in speech. Second, having a free ecology isn't the source of wealth. You are certainly not free to pollute as much in Finland, for instance, as you are allowed in China, but Finland is by very far the richest country of both. Even exporting polluting scrap to other countries is tightly regulated by Finnish law, yet it manages to be one of the most competitive economies in the world.
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Re:gah.. (Score:2)
well, you can take that up with milton friedman [stanford.edu], champion of neoliberalism. it's his example [urbanvancouver.com].
ultimately, i think you're stretching the concept of property rights [econlib.org] a bit!
An example of a REAL free market, win-win situation is if I have a house for sale for $100K
yes, that is a "real win-win situation"... but, again it doesn't include externalities since, by definition, externalities have no direct effect o
Re:gah.. (Score:2, Funny)
I already knew before. The next step is to research Ethical Calculus and Doctrine: Loyalty. Come on people, you have tech trees, use them.
Re:gah.. (Score:5, Insightful)
When we truly understand the mind, will we really need an economy? Cognitive science is a field I find myself interested in. As such, I've often pondered what society will do when we've unlocked the secrets of the mind. Now I know... How can the greedy be phased out? How much does one man need?
Well, economics is a social science. As such, it most likely will never rest upon firm rules such as those in the natural sciences. Cognitive science won't provide those rules because it merely describes the brain's functionality on a neural level. But quite frankly, humans are not the sum of our neural activity (to take from another school of psychology, Gestalt). If we view consciousness as an emergent property like John Searle does then the inability to make this correlation becomes clear.
Summary: looking at the brain won't create miralculously successful economic theories/"laws".
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Re:gah.. (Score:2)
Re:gah.. (Score:2)
Capitalism might be effected, but economics will still exist.
Re:gah.. (Score:2)
How would you define greed? At the simplest level greed is the desire for anything you don't need to survive. Yes if you eliminate greed there is no need for an economy, since there would be no need to trade. Of course it would make for a very boring world. Everybody creating and consuming only what is needed, food, water, and basic shelter.
How much does one man need?
It's not about need, it's about want. People have very few needs, but pretty much have unlimited w
Education (Score:4, Interesting)
It seems then that education can subdue a feeling of loss after an economic tradgedy. Most people who lost their savings in Enron for instance, were not aware their retirement hinging on the profitability of one company, was not a secure portfolio.
Simillar business models already in use. (Score:4, Insightful)
Interestingly, the guys doing the 'cash your paycheck now' seem to have already tapped into this insight.
Even people who need the cash now would often be better off just telling their landlord they'd be late - yet these check-cashing places (that do almost exactly that $100 now vs $115 in a week) do well.
Wonder how they figured this out without brain scanning? :)
Re:Simillar business models already in use. (Score:2)
Now if you keep that 3-6 month cushion of liquid money that you should be keeping around, then you would just be able to dip into those funds for a few days while you cancel the cable and do whatever other options are needed to stop the red ink.
Also, on the society level, citizens are bombarded with advertisements. They don't make it easy f
Re:Money is an addiction (Score:2)
Anyone routinely taking loans at over 10% per year is throwing a lot of money away.
This does not apply when inflation is running at 1,000%/year (rate, not yield), but we are far from inflation rates of that order.
Re:Money is an addiction (Score:2, Interesting)
For $100 today to be worth more than $115 a week from now, you'd have to have %100,000 annual inflation, which is well outside the expectation of Americans.
And if you adjust all the numbers in question for 10% inflation, for instance, people would then be choosing between $100 today and $115 in a week; and between $91 a year from now and $105 in a year and a week (rounding off the pennies). The rational choice would be to p
Is this really a breakthrough? (Score:3, Insightful)
Re:Is this really a breakthrough? (Score:2)
That works. (Score:3, Interesting)
Re:That works. (Score:2)
Considering that the whole concept of economics was created in human minds, using the human mind to better understand it seems quite logical.
Well, it seems logical... But the problem is that humans often act in illogical ways. Perhaps that's part of the root of problems when social science tries to formulate hard rules like natural science. And remember that human minds have been trying to better understand themselves since Aristotle and earlier and we're still not sure what's going on with ourselves
I for one... (Score:3, Insightful)
Dickens and all you need to know about Economics (Score:3, Interesting)
Observing (Score:3, Interesting)
Re:Observing (Score:2, Informative)
For example, there was a neatly done study on preferences that showed that brief exposure to an image - too short for conscious recognition or memory - would result in that image being chosen as
Partial revolution at best (Score:3, Insightful)
Those two approaches balanced each other out OK, but it obviously leaves things incomplete. Experimental economics in general and neuroeconomics in particular takes things out of that purely thinking-about-it realm and starts to make it empirical. That's mighty cool.
On the other hand, the article was terribly lax in what it considered economics. "Economics" can cover a lot of ground, but reducing it to psychology or cognitive science is counterproductive. Economics is properly about interactions between people, often very large groups of people. Identifying what happens in someone's brain when they think about expected values--or even when they're playing a game with someone else--only tells you about the individual, not the system.
An important part of economics is in describing the individuals, who are usually treated as the "atoms" of an economic system. But economics is more importantly about what happens when you throw a lot of them together, which will still require a lot that you can't get from brainscans.
Reading entrails to see the future (Score:3)
Working out how people behave may possibly help, but since the occasional major scam or mental illness of the leading stockbroker in the country (happened in Australia) has major effects, you can't trust complex models very closely.
Economies surge and fall on hype, lies and what look like incredibly stupid decisions in hindsight. Surely the USA knew that bankrupting Europe in the 1920s by calling in the loans at once would hurt them as well? Who was going to buy their goods if no-one had any money?
Re:Reading entrails to see the future (Score:2)
Used out of context they are both bad. As an example, the behavior of metal at high temperatures and stresses can be described by several empiricly derived equations - but you have to use the right one in the right conditions. You can't build a complex model of that situation out of the other equations because there are discontinuities, so you would predict complete garbage in a lot of situations. The secret there, as in plenty of other
Re:Reading entrails to see the future (Score:2)
The action was taken on the advice of several respected economists (cannot recall their names) who very very confidant that they were correct, so it shouldn't matter that the Prime Minister was not an economist. We shouldn't have to elect experts of every kind - the USA certainly did not elect a competant military officer as President in the recent elction despite there being a lot of fighting going on
Heading down the wrong path (Score:4, Interesting)
Ever wonder why you see bears and tigers so often in commercials? Or certain colors? Or themes? ("I am different") That's because the powers-that-be have determined through exhaustive surveys that these are the things that push people's buttons the best.
Now I guess they're going high tech and studying the brain directly with MRI machines and stuff.
I have a suggestion for the big boys: Make a good product and sell it at a reasonable price.
assumption of risk-neutrality (Score:5, Interesting)
Well...it depends. That statement assumes that a person has preferences described by a risk-neutral utility function (for example, a linear function). In that case the utility a $1000 gain would fully compensate for the decline of utility from a $1000 loss.
However, people can also be risk-averse (in which case the loss in utility from being out $1000 would be greater than the gain from receiving $1000) or risk-loving (in which case the opposite situation happens). Further, they can be any of those within particular intervals. It's generally accepted that not all agents are risk-neutral (though it does make some models easier to build).
But.... (Score:2, Informative)
The same basic flaw exsists in national survey
Re:But.... (Score:2, Insightful)
Be Skeptical of Conclusions Drawn from Brain Scans (Score:5, Informative)
...but in this article, the scientists are trying to draw conclusions about how the brain functions, from a standpoint relevant to economics, by looking at fMRIs. There's nothing wrong, per se, in doing this, but I don't think brains scans are really a very good tool for determining the mechanism of brain activity in this context, or even a very good mechanism for determining the locality of brian activity. This is because:
1. fMRIs don't have very high resolution (not much less than 100 cubic millimeters per voxel)
2. They measure blood flow, which might be related to where the "thinking" in the brain is most intense, but who's to say that the "real work" isn't happening somewhere else by a smaller number of less blood-consuming neurons.
3. Brain scans only show correlation, not causation- We might be able to say that certain brian activity and behavior seem to be connected, but you never know whether an uncontrollable "third variable" might be mucking up the results (note how these experiments involve some math- maybe the brian regions are just showing activity because of math calculations?)
There seems to be a lot of grant money out there for people who say "hey! I know! let's research X by sticking people doing X in a brain scanner!" The media loves reporting on this stuff for some reason, but it seems many of the results from such studies are pretty shaky and inconclusive, compared to more invasive studies that measure actual receptor activity or responses to drugs- Or involve anatomical studies in cadaver neurons. Again, just my personal opinion- and in some cases, there probably is no other way to get data and some data is better than nothing.
Re:Be Skeptical of Conclusions Drawn from Brain Sc (Score:3, Insightful)
I am.
1. fMRIs don't have very high resolution (not much less than 100 cubic millimeters per voxel)
Compared with other brain imaging techniques, fMRI has excellent spatial resolution. Where it is lacking is that is has relatively poor temporal resolution - since you can only take a scan every 2 seconds or so (if you are scanning the whole brain) then you can't get very fine information about temporal dynamics.
2. They measure blood flow, which might be related to where the
Re:Be Skeptical of Conclusions Drawn from Brain Sc (Score:2)
There seems to be a lot of grant money out there for people who say "hey! I know! let's research X by sticking people doing X in a brain scanner!"
Not enough! It's quite expensive to do fMRI and federal funding from NSF is decreasing. It's not really as if people are throwing money around - grants are very competitive.
But I have to disagree with this one! Basic behavioral and (many forms of) computational cognitive science are starving as everyone follows the dollars to c
Re:Be Skeptical of Conclusions Drawn from Brain Sc (Score:4, Interesting)
Where do you think the money comes from? I'll tell you: it's sucked out of grants that used to go to much more efficient methodologies, like EEG, psychophysics, modelling and even simple behavioral research.
The money you spend in just magnet fees (nevermind the cost of building it in the first place) from just 1 single experiment is enough to pay someone's salary for an *entire year* running 3-4 psychophysics experiments.
Just so people understand what I'm ranting about you're often talking about some $800 in operating fees *per subject*, and at 30 subjects, that's $24,000.
Other methodologies are insanely cheap in comparison. You can buy an entire EEG rig for just $40,000, and each subject costs about $10-$20.
The fact that you consider the atrocious amount of grant money you (I'm guessing you do imaging research from the text of your post) gobble down *insufficient* is frightening to those of us who scrape by on experimental methodologies that are two orders of magnitude cheaper.
Imagers are like army ants, consuming all available grants in their path and always hungry for more money.
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Re:Be Skeptical of Conclusions Drawn from Brain Sc (Score:4, Insightful)
The entire field of neuroscience is being slowly dragged into fMRI research because the money is there. And the money is there because brain pictures are pretty, so people who don't understand the underlying science are eager to throw money at the method. That's the really sad thing, an entire field of research is being corrupted because of aesthetics.
Every day valuable non-fMRI methodologies are thrown out the window in favor of crippled methods that are scannable because magnets are being built like Starbucks throughout the world. Inside a magnet, your experimental options are very limited compared to outside.
And for what? it's not as if knowing what part of the brain lights up tells you about how the brain is doing that thing. This article is an excellent example of the layperson naivete that feeds the fMRI cash-cow. Scientists have known about these failings of human decision making for many years. The idea that we are flawed at rational decision making is hardly news. But throw someone in a scanner, see part X light up and suddently we understand how the brain works?
Bollocks.
These imaging studies are useful yes, especially in the context of other things we know about what different parts of the brain do.
But they do not represent some bold (heh) new understanding of "neuroeconomics", which is just decision making theory and neuroscience given a fancy name.
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reason vs logic? Go tell it to freemarket geeks! (Score:2)
For example, the idea that humans compute the "expected value" of future events is central to many economic models.
And a rather sad and relevant example of how many humans do NOT compute the expected value of future events is the freemarket-free trade-libertarian computer/engineering geeks, and how they all seem to think THEY will be rich, and so unionizing or similar organizing is not needed for their occupation. This type of personality/age group is typically quite illogical when it
Re:reason vs logic? Go tell it to freemarket geeks (Score:2, Insightful)
I dont think most libertarians or free-market geeks believe they will become rich or wealthy. I don't quite get where you think that.
This type of personality/age group is typically quite illogical when it co
Whats next? (Score:3, Interesting)
Neuroreligion: to understand the neurological need to have a faith/religion/cult to be a part of
Economists mixing up Ordinal and Cardinal Values (Score:4, Interesting)
One way that the difference between physics and economics really stands out is how cardinal values play a big role in physics down to the tiniest levels but on the level of the individual economic decision maker, cardinal values do not describe well how decisions are made.
Cardinal values are values that you can perform arithmetic on. Examples are weights of things, for instance one man can carry 25kg, two people can carry 50kg, one man can carry 5 things each weighing 5 kg.
Ordinal values are values that are merely descriptive and cannot be combinded, divided, multiplied,etc or doing so produces a nonsensical result. Examples of ordinal values are People's Names, Zip Codes, etc. You can add two zip codes together but it's not going to MEAN anything.
In the same way economic decisions are made based on ordinal desires that at best are only arrangable on a constantly changing scale of preference of known available goods.
Let me put this in Slashdot terms: Why is a vic 20 worthless today but it was worth $100 twenty years ago? Even though there has been significant inflation since then? Because it provides less "utility" then it did then??? No, according to the classical definition of utility, you can still plug it in and program it in basic, just like you did twenty years ago. You can still load text games and play them like you did 20 years ago. It's got a rip roaring 300 baud modem that you can use.
20 years ago, one could work at a decent job for 10 hours and buy a vic 20. Which you might want to do if you were a geek and into basic programming.
Now if one works at ones job for 1/2 hour you can buy a vic 20 on ebay, but if one works at ones job for 10 hours one can buy a regular modern pc. Why would anyone forgo the vic 20? Doesn't it have the same utility and it's selling for 1/20 the price? Well the effort of 9 1/2 hours of work and forgoing the other things you could buy for the money are enough to make it worth while to not bother with the vic20 and pick up the new pc for most people.
So basically all the numbers you applied to your vic20 demand supply/curve differential utility equation are going to be speculative at best because of alternatives , new technology, fads, trends, etc that constantly change the economic landscape.
Re:Economists mixing up Ordinal and Cardinal Value (Score:2, Insightful)
Cardinal values are great! Everyone loves cardinal values! And economists do use cardinal values when it's the only way to get meaningful answers (primarily this shows up in expected utility theory). Economic theory is built largely
Re:So... reading your mind to predict (Score:2)
Didn't read the article, I see. Far from presuming that investors behave rationally, they are trying to understand the neural basis of irrational or inconsistent behavior.
WARNING (Score:4, Funny)
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Re:Thats an interesting way to put it.... (Score:4, Interesting)
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