Natural Rationality | decision-making in the economy of nature


On neuroeconomics, its content and its future

I have been contacted by a research group who prepare a report to the Benchmarking Panel of Economics Degrees, to recommend whether Neuroeconomics should be taught as part of Economics degrees at universities across the UK. They had a couple of questions about neuroeconomics, its teaching, its future, etc. My answers are posted here.

What do you feel the teaching of Neuroeconomics gives to its students? (I.e. why would you recommend it to be studied).

  • I strongly recommend that any student of economics has a bacground in neuroeconomics.
  • Neuroeconomics does what economics should be doing: providing sound models of human valuation before devising more abstract theories.
  • It promotes an empirical attitude in economics.
  • Neuroeconomics is part of a Trinity: with psychology and classical microeconomics, one has behavioural data, neural activation data and formal models to describe the behavior and the neural activity. A genuine economic science should deals with neurons, peoples and values.
Do you feel the course is challenging to Economics Students? If yes, how so?

  • yes, because neuroscience is a highly technical field. Students do not have an empirical background (psychology, neuroscience). Economic departments, however, would benefit from this integration.
Are you pleased with the overall results achieved by your students?
  • I taught a course called “Natural Rationality” at the University of Waterloo, and almost half of the content was about neuroeconomics: It triggered many discussions and reflections. So yes, I am pleased with these conceptual “results”.

What potential careers would you feel Neuroeconomics students could succeed in?

  • Research in cognitive neuroscience, (not basic neuroscience), experimental economics, microeconomics, sociology, policy-making, Law, politics, psychology, marketing, management.

What potential do you feel Neuroeconomics has for the future of economics in terms of both research and teaching? (I.e. do you feel this will continue to catch on or will the academic world lose interest?)

  • Neuroeconomics is not a temporary buzz: it will stay, because it is a complement to behavioural economics. Even if economists lose interest, many researchers from other fields would pursue the project. For the first time in the history of economics, we have – at the same time – formal models of decision-making, cognitive theories of judgment, empirical data on subjects’ real behavior, neural data on brain activation and anatomy, and computational description of neural processes. Economists who take this interdisciplinary turn will revolutionize the discipline. Their students will not discuss axiomatization or existence theorems, but prediction, refutation, correlation, etc. Although it will be hard to keep up to date (there is already many publications), handbooks of neuroeconomics could help research and teaching.

Many sceptics of Neuroeconomics say that the subject only shows where things in the brain happen, and not necessarily why they happen. What would you say to them to convince them otherwise?
  • I would first reply that saying that implies discrediting all imaging studies: it is a huge claim. It is always theoretically and practically useful to know what brain resources are involved in an economic task: is it positive/negative emotions, cognition, reward processing, action representation, etc.
  • Second, neuroeconomics is not just about imaging: it is also about providing models of neural mechanisms of decision-making, motivation and valuation.
  • Third, I would give an example: look at the ultimatum game results. We now from experimental psychology that people make ‘fair’ offer, and reject ‘unfair’ ones. This is compatible with many interpretations (people are irrational, people are influenced by the experimenters, people value fairness). Neuroeconomics (Sanfey et al, 2003) showed that unfair offers trigger negative emotions (anterior insula). Thus it narrows the range of interpretations: people reject unfair offers because they don’t like that. They have preferences for fair offers. The study also showed that other areas are involved: the dorsolateral prefrontal cortex and the anterior cingulated cortex. The first one is involved in cognitve control, the other in emotion modulation. Thus subjects’ choices balance fairness and monetary gain: this processing is not captured by decision theory. Other neural studies also showed that subject enjoy making cooperative moves in prisoner dilemma. Thus subjects value something else than just money. This is important for economics.

Many techniques of brain imaging either don’t show enough detail or are potentially damaging to human subjects, or simply cannot be used on humans at all. How do you feel this potential downside of Neuroeconomics will develop, and could it damage the long-term potential for Neuroeconomics to be taught across the board?

  • No, because cognitive neuroscience also faces the same problems. Moreover, neuroeconomics also relies on lesion studies, animal models and computational modelling. Again, Handbooks of neuroeconomics could be use as “databases” for research in economics.

Please add any further comments:

  • The keyword for the future of economics is interdisciplinarity: neuroscience, psychology, biology, Artificial Intelligence and anthropology are all necessary if we want economics to be the “science which studies human behavior as a relationship between ends and scarce means which have alternative uses” (L. Robbins). Formal models can represent human behavior, but these models ought to be grounded in facts, something these disciplines can afford.