Section 3
The Future of Neuroeconomics
Ernst Fehr
"The emerging neuroeconomic approach rejects the premise of unobservability, and seeks a microfoundation of social and economic activity in neural circuitry, using functional magnetic resonance imaging (fMRI), transcranial magnetic stimulation (TMS), pharmacological interventions and other techniques." [2]
While the traditional economic approach generally assumes that people act in a self-interested manner, Ernst Fehr has uncovered a large amount of experimental evidence that would indicate many people act according to social preference. This means that their choices are based on positive or negative concern for the welfare of others and on what other players believe about them. [1] Fehr's work focuses on an "economics of reciprocity" in which individuals will contribute to common goals that aren't necessarily beneficial to themselves when others are contributing. The foundation of social neuroeconomics is based on the fact that there are competing motives in making decisions rather than just self-interest. These competing motives not only include reciprocity, but altruism and inequity aversion as well. Fehr conducts several studies that "reinforce the idea that social preferences for donating money, rejecting unfair offers, trusting others and punishing those who violate norms, are genuine expressions of preference." [2]
The Future of Neuroeconomics
Ernst Fehr believes there is great potential ahead for neuroeconomics. He uses an example of how most economic analyses view risk, time, and social preferences as separate types of preference. Fehr contrasts this viewpoint with the assumption that "all three types of preference share some common neural circuitry for controlling automatic emotional impulses, by integrating all the costs and benefits of choices." If there is some type of correlation, Fehr thinks it is important for economists to understand. This would be established through neuroscientific data such as imaging and lesion patient studies. [2]
Valuable lessons can be taken from the field of neuroscience and implemented into economics. This is one of the core values of neuroeconomics. In neuroscience, before a finding can be accepted as "proved" they must provide convergent evidence. "This typically means using different measurement modalities, subject groups, and moving from correlation to causation." These lessons can be illustrated through a neuroscience example done by Hill & Sally in 2003.
In this study, they compared the behavior of healthy adults and children to that of autistic subjects of the same age. The study was designed to measure altruistic behavior. The study involved two participants with one receiving a monetary endowment having the choice to give away some amount to the second participant. Healthy adults typically offered 10% or less to the other participant. The report showed that autistics were no less likely to cooperate in giving away amounts of money, but they were not consistent in repeat play. This appeared to be from a lack of a mind for autistics because even young children were able to learn this. The conductors of the study indicated that this difference of behavior may occur because autistics have not developed the idea of "social fairness" that most healthy inviduals have learned through numerous social interactions. [3]
Neuroeconomics Influence on Law and Policy
An important area that neuroecomonics can contribute to is the law. Laws specify the "rules" but not everyone follows these rules, even though their actions may result in harsh punishment. Neuroeconomics can help to answer questions such as "Why do some subjects still choose to do this? What drives such behavior? How much of it can be traced to nature and nurture?"
A specific legal example would be property crime. This is little impacted by outside factors such as punishment, increased likelihood of detection, or alternative leisure activities. More effective laws may be introduced "if the neural activity associated with obtaining property illegally, but risking punishment, were characterized." A neuroeconomic experiment that would help in this study is the 'power-to-take' game. Neuro activity can be monitored to gain a better understanding of why most punishments fail to stop larceny, and could help to search for those that may work better. The neuro activity of criminals could be compared to non-criminals to understand why these acts are repeated even after punishment. This is only one example of how neuroeconomics can help to improve laws. This example also raises many other ethical issues such as using "averaged brain data to determine policy, using brain-scanning data to identify criminals, appropriate statistical thresholds to determine if something has been demonstrated, etc." [3]
Sources
[1] "Do Economists Need Brains." The Economist 24 July 2008.
[2] Fehr, Ernst and Camerer, Colin. "Social neuroeconomics: the neural circuitry of social preferences." Science Direct 02 Oct 2007 Vol 11 No 10.
[3] Zak, Paul. "Neuroeconomics." The Royal Society (2004). 26 Nov. 2004. 17 Apr. 2009 <www.neuroeconomicstudies.org>.
