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The Almighty Buck Biotech Science

Neuroeconomics: Biotech Meets Economics 157

Posted by michael 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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Neuroeconomics: Biotech Meets Economics More

Neuroeconomics: Biotech Meets Economics

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  • gah.. (Score:3, Insightful)

    by Antonymous Flower ( 848759 ) on Saturday January 15, 2005 @10:07PM (#11376838) Homepage
    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?

    • Re:gah.. (Score:5, Insightful)

      by incast ( 121639 ) * on Saturday January 15, 2005 @10:17PM (#11376880)
      Economics and the existance of the economy is based on exchange, not greed. Economics is the study of choice and policy within a given theoretical framework, not the study of greed with the implicit assumption of taking from the have nots. Once/when we "truly understand the mind," the economy will simply be better, not obsolete.

      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).
      • Economics and the existance of the economy is based on exchange, not greed. Economics is the study of choice and policy within a given theoretical framework, not the study of greed with the implicit assumption of taking from the have nots. Once/when we "truly understand the mind," the economy will simply be better, not obsolete.

        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 l

        • I don't disagree with you. This is why I left the definition of a "fair" allocation of resources up to the reader. The potential for control and misuse of information exists, but the presence of new/more/better information brings at least the potential to do better than we are doing now.

    • Re:gah.. (Score:2, Funny)

      by nomadic ( 141991 )
      As such, I've often pondered what society will do when we've unlocked the secrets of the mind. Now I know...

      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)

      by cynic10508 ( 785816 ) on Saturday January 15, 2005 @10:51PM (#11377020) Journal

      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".

      • I believe you are correct, sir. Don't we really have a good general idea of how economic agents behave, for example Maslow's Pyramid of Needs? I am skeptical of how fruitful this research will be. This problem of hyperrational agents goes back to 1900s when it became mainstream. I think Veblen described the limitations of mainstream theory best:

        "The hedonistic conception of man is that of a lightning calculator of pleasures and pains, who oscillates like a homogeneous globule of desire ... under the imp
      • I knew you were going to mention Searle even before you did it. John Seale is full of shit. Dennnett is closer, until he denies qualia all togeather, and then he is full of shit too. But clearly, consciousness is the sum of neural activity. It is simply unscientific to believe anything else.
    • The formal definition of economics is the system of distribution for "scarce" resources. As such, economics will stay around until we can get rid of scarcity.

      Capitalism might be effected, but economics will still exist.
    • How can the greedy be phased out?
      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
    • When we truly understand the mind, will we really need an economy?
      No, because knowledge of the mind will obviously cause goods and services to fall out of the sky.

  • Education (Score:4, Interesting)

    by saskboy ( 600063 ) on Saturday January 15, 2005 @10:10PM (#11376850) Homepage Journal
    "Economists have usually assumed that people's well-being, or "utility", depends on their level of consumption, but it might be that changes in consumption, especially unexpected downward ones, as in these experiments, can be especially unpleasant."

    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.
    • 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.

      Well obviously the non-Enron employees didn't invest all their money in one company; pension plans are like mutual funds, they're pretty diverse.

      The Enron employees were locked into buying Enron stock by their 401(k) agreements. They couldn't diversify, even if they wanted to.

  • Simillar business models already in use. (Score:4, Insightful)

    by Anonymous Coward on Saturday January 15, 2005 @10:10PM (#11376851)
    The article mentions: "People tend much to prefer, say, $100 now to $115 next week, but they are indifferent between $100 a year from now and $115 in a year and a week. "

    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? :)

    • I wonder the same thing, why take an X% hit just to avoid waiting an extra week or so for your cash, nevertheless I know several people who wont.

      Now I can provide commercial lowns that net about 25% return in as little as a week, and you show these companies the payment schedule up front. They still *NEED* the cash now, go figure. I'm not complaining.

      • It's called time preferences.

        As inflation keeps going/picks up and the dollar loses more value, more quickly, expect time preferences to get much more immediate, and people to be willing to have less money in order to spend it quicker.
        • Inflation is miniscule over the course of a week or so. It is mostly lousy planning skills or a total lack of math sense that leads people to do this.

          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.
          • Right, point taken that we are not hitting hyper-inflation or anything like that now(yet), and that inflation currently is miniscule (and if the .gov's numbers aren't too cooked, neglibile.)

            It's just a sub-point that time preferences get higher with inflation; the point is that high-interest short loans are an expression of time preferences.
        • "Time preferences" be hanged! The last time I needed to get a short term loan for an astronomical interest rate was when I suddenly realized that my mortgage payment was going to overdraw my account big time if I didn't get some money into it without delay!

        • Re:Money is an addiction (Score:2, Interesting)

          by Kafir ( 215091 )
          It is called time preference, but the expectation of inflation doesn't explain it.

          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
          • I suppose I stated that wrong -- I did not mean to suggest that time preferences only came from inflation. I only meant to suggest that inflation would make time preferences much higher/more immediate.

            Personally, I don't see anything irrational about a bird in the hand versus two in the bush. :)

            • Yeah, I also left out the time value of money because I thought a longer explanation would just confuse things -

              But what is interesting is not that I'd rather have a smaller amount now than a larger amount in a week. What's interesting is that if you had asked me to make that decision a year ahead of time I would made the opposite choice. (I would have said I wanted the larger amount, in a year and a week.)

              And neither inflation nor the time value of money can provide any explanation of why that should be
    • That's because when it comes to math (and money sense essentially applied math), the average US person sucks at it. If they suck at anything worse, it's planning ahead.

      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:Simillar business models already in use. (Score:1, Informative)

      by Anonymous Coward
      Wonder how they figured this out without brain scanning? :)

      Funn y you should ask that... [wikipedia.org]

      It's the Time Value of Money Theorum in finance, taught in any fundamentals of finance class. It's a fascinating idea that leads nicely into the oportunity cost(the cost of not doing something) lecture.
    • I think it would be interesting to see similar studies done in other countries and historic data for this. It seems to me that here in the U.S. we have become more interested in instant gratification, which is clearly an emotional response as the article suggests they are seeing.

      Someone else may be able to explain why that is or blame it on MTV, but this would appear to be one of the results. Perhaps we as a nation have just been encouraged by too many social workers and such to be too emotional and not

  • Is this really a breakthrough? (Score:3, Insightful)

    by fuzzdawg ( 671742 ) on Saturday January 15, 2005 @10:11PM (#11376861)
    I don't really think so. All that they really are doing is showing that our thought processes are largely governed by our desire to survive. By increasing the amount of money, the researchers pretty much told the subjects minds that they are being more successful in their environment -- just a positive feedback system increasing survival chances of the subject. I dunno, this research doesn't really prove anything.

  • That works. (Score:3, Interesting)

    by qw0ntum ( 831414 ) on Saturday January 15, 2005 @10:16PM (#11376877) Journal
    Considering that the whole concept of economics was created in human minds, using the human mind to better understand it seems quite logical.

    • 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

      • What I mean by logical is that it seems logical to look for a better understanding of economics in the place where it started, the human brain.

  • I for one... (Score:3, Insightful)

    by Yaa 101 ( 664725 ) on Saturday January 15, 2005 @10:18PM (#11376889) Journal
    Applaud the next vague money landgrab...

  • Dickens and all you need to know about Economics (Score:3, Interesting)

    by Anonymous Coward on Saturday January 15, 2005 @10:33PM (#11376936)

    Annual income twenty pounds, annual expenditure nineteen nineteen and six,
    result happiness.

    Annual income twenty pounds, annual expenditure twenty pounds ought and six,
    result misery.

    -- Mister Micawber (in David Copperfield)

  • Observing (Score:3, Interesting)

    by mralert ( 837483 ) on Saturday January 15, 2005 @10:39PM (#11376961) Homepage
    Interesting read. Let's say the neuroeconomists find some new microeconomic stuff that deviates from the standard assumption of rationality. Wouldn't people respond to that by using this information about systematic non-rationality to transfer wealth from "non-rational" to rationals? I.e. the object observed (human interaction) will be affected by the results of the observer (the research), which will render the conclusions of the result questionable. Just some random thoughts -- guess it applies to all social sciences, and economics in particular :-)

    • Re:Observing (Score:2, Informative)

      by loose_change ( 196779 )
      There is, in my view as a neuroscientist, a basic flaw in the premise of rationality in individual economic decision-making. Preferences are not always rational, and several studies show that short-term gain almost always trumps long-term gain, even when the short-term gain will definitely decrease long-term gain.

      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

      • Re:Observing (Score:2, Interesting)

        by tinkerton ( 199273 )
        Rationality is a very narrowminded concept. It's no wonder so much behaviour is then considered irrational. Maybe the concepts of rationality and irrationality are medioce and we should avoid using them altogether.

        In your second experiment, people don't conform to the predefined model called 'rational' behaviour.

        Suppose that you call how people handle the '$ in a bowl' experiment "thinking". Suppose the people don't just "learn" not to take the dollar, they decide it's time to postpone taking the dollar
        • "The boy chose the 50c each time."

          Clearly, he was the smarter one from a purely economic point of view. Had he taken the dollar everytime, he'd stop getting a stream of $0.50 in the future.

          This is the difference between the Prisoner's Dilemma game played ONCE vs. played repeatedly.
          The best strategy for ONCE is not the BEST when the game is repeated indefinitely. This is why TIT-FOR-TAT is almost an optimal strategy for purely rational reasons.

          With the Nike example, you have just demonstrated a rational
  • Perfect price discrimination. Yay.

  • Partial revolution at best (Score:3, Insightful)

    by cretog8 ( 144589 ) on Saturday January 15, 2005 @10:42PM (#11376974)
    This work is valuable. The tradition of individual choice in economics has been pretty much based on two approaches until recently. The first approach has largely been one of a bunch of people saying to each other "this seems reasonable doesn't it?" and when enough of them answer "yep", it goes into the theory. The second approach is an attempt to be hardcore scientific and positivist, which basically meant you couldn't put anything in the theory which smacked of knowing how a person felt about anything.

    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)

    by dbIII ( 701233 ) on Saturday January 15, 2005 @10:43PM (#11376977)
    Simply put - economics is about predicting the future, which is so hard to do that the economists current cute little linear models didn't hurt. It's just that they keep pushing them beyond the point where they countn't possibly apply.

    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?

    • Simply put - economics is about predicting the future,

      Or explaining the past, and the present.

      which is so hard to do that the economists current cute little linear models didn't hurt.

      You mean cute little linear as in Stochastic Dynamic General Equilibrium [mcgill.ca]

      you can't trust complex models

      So you disapprove of both "cute little" as well as "complex" models?

      • So you disapprove of both "cute little" as well as "complex" models?

        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

        • Yes, models used out of context are bad. Obviously. Economics isn't a science because it... isn't science. It's social science, and the two are vastly different. There is no way to find ceteris paribus effects of most things economists study. Controlled experiments simply aren't possible most of the time. Being in my senior year as an economics major, I have NEVER been told by a professor or via a text book that the models are to be taken as the absolute truth. They ALL argue that what they present a

          • Don't blame economists because you elect non-economists to office to create (non-monetary) economic policy

            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)

    by Spy Handler ( 822350 ) on Saturday January 15, 2005 @10:43PM (#11376978) Homepage Journal
    This is but the latest in a long-running attempt to study and influence consumer behavior. Madison Ave has been doing research for decades and they have a huge amount of data on this.

    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.

    • Ok, I'll bite. I'm in the advertising industry, and I have one thing to say to you. Its all about the bottom line.

      Now, take that however you want, but when I say that, I mean that they would nto be doing these studies if they weren't damned sure it held some value. Do you have any idea how much new psychology we've unearthed due to the research of Madison Ave.? Personally, I say let them keep using the data for their campaigns, as long as they fund research which can benefit everybody.

  • assumption of risk-neutrality (Score:5, Interesting)

    by techstep ( 80533 ) <jeffer@NOSPAM.techstep.org> on Saturday January 15, 2005 @10:59PM (#11377052)
    FTA: Traditional economists had long thought--or assumed--that the prospect of a $1,000 gain could compensate you for an equally likely loss of the same size.

    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).

  • that the Foundations of this seem so Psychohistoric. Wish this was first speaker, er first post...

  • Re: (Score:2, Informative)

    by account_deleted ( 4530225 )
    Comment removed based on user account deletion

    • Re:But.... (Score:2, Insightful)

      by jthayden ( 811997 )
      The result doesn't have to be a perfect model, just a more accurate model. If you think our models are currently only 75% accurate, then if this can boast them to 80% great. Maybe we'll make that many more people's lives better. I think they are also dealing along the lines of demand side microeconomics and not monetary policy macroeconomics. Yes they influence eachother, but it seems unlikely people the majority of the population will have any feeling other than bordeom with questions about the Reserve
  • Biotechonomics.
  • IANA neuroscientist...

    ...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.
    • IANA neuroscientist...

      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
      • You make a lot of good points.

        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
      • I assume that the end result of this research look like this: A person uses brain center A for short term investments and brain center B for long term investments. Now we have explained the difference between short- and long term investments strategies.

        This knowledge must be interesting for a neuroscientist, but how does it become interesting for an economist? I mean what would be the optimal outcome of this research project? Would it be fMRI assisted management courses?

      • Re:Be Skeptical of Conclusions Drawn from Brain Sc (Score:4, Interesting)

        by Illserve ( 56215 ) on Sunday January 16, 2005 @08:36AM (#11378415)
        Not enough?! Argh, it hurts to hear you say that.

        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.

      • > Compared with other brain imaging techniques, fMRI has excellent spatial resolution.

        True, but a neuron has has diameter of 100 microns- I'm just saying that in the popular media "brain scans" have attained a kind of mythical status about their power, and that many scientists in fields like fMRI encourage this kind of thinking (as I often see on tv or in print) when they could be more consciensous about communicating the inherent limitations.

        > In any scientific experiment, you manipulate one v

    • Re:Be Skeptical of Conclusions Drawn from Brain Sc (Score:4, Insightful)

      by Illserve ( 56215 ) on Sunday January 16, 2005 @08:16AM (#11378369)
      The pro-fmri bias is infuriating really.

      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.

  • from the article:

    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)

      by Anonymous Coward
      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

      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)

    by dreadfire ( 781564 ) on Saturday January 15, 2005 @11:21PM (#11377136) Homepage
    The following field have now just been created..
    Neuroreligion: to understand the neurological need to have a faith/religion/cult to be a part of
    • This is not new. It is already been looked at, and yes, their are some who believe a small location in the brain ties into this. And, believe it or not, it is part of the pleasure center. Here is an article [economist.com] that about one such person. I have no opinion on this research as I know too litle about the research or the researcher, but I thought it would be interesting given your quote.

      InnerWeb

  • Economists mixing up Ordinal and Cardinal Values (Score:4, Interesting)

    by TheNarrator ( 200498 ) on Saturday January 15, 2005 @11:31PM (#11377167)
    These neurologists are going to attemtpt to assign "values" to utility, usually with a arithmetical number that they can plug into a differential equation so they can appear impressive. However ye' old Austrian school realized that attempts to utilize the methods of physics in describing economic behaviour are bound to fail due to the problem that people acting purposefully make purposeful decisions while falling bodies or two chemicals reacting with each other do not make purposeful decisions.

    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.

    • "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 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

  • Efficient Markets (Score:2, Insightful)

    by Zinch ( 218523 )
    For example, the idea that humans compute the "expected value" of future events is central to many economic models.

    Humans may not do this on an individual basis, no. However, pretty much everyone who makes an economic decision attempts to do this, be it through guessing, heuristics, or with a spreadsheet. The interesting thing about markets is that they collect and aggregate all these decisions together and produce a very accurate result.

    That's why, even though people may act without full logic and w
  • All this sounds rather like Michael Rothschild's Bionomics: Economy As Ecosystem [amazon.com]. According to the description, Rothschild "sees capitalism as the evolutionary result of organisms (businesses, corporations, markets, economies) that seek to preserve themselves through adaptation to environment and "genetic" inheritance of successful characteristics."

    I have not read it yet, but it got very good reviews.

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