textbook

According to the Society for Neuroeconomics, a first handbook of neuroeconomics will be published this year: all the major researchers will be there. Can't wait !

The first handbook of Neuroeconomics is being published by Elsevier Academic Press in association with the Society for Neuroeconomics, to be released in September 2008

The first handbook of Neuroeconomics, entitled Neuroeconomics: Decision Making and the Brain, is being published by Elsevier Academic Press in association with the Society for Neuroeconomics for release in September 2008! Edited by Society for Neuroeconomics board members Paul Glimcher, Colin Camerer, Ernst Fehr, and Russell Poldrack, the book represents the first comprehensive survey of this growing field and should serve as both a permanent reference work and a textbook appropriate for use at the graduate level. The volume begins with a brief history of the field written by the editors and then presents 33 chapters divided into 5 major sections. These five sections are: Neoclassical economic approaches to the brain, Behavioral economics and the brain, Social decision-making neuroeconomics and emotion, Understanding valuation - learning values, and The neural mechanisms of choice. Each section begins with an overview chapter authored by a major scholar, and the book concludes with a similarly authored conclusion. The Nobel laureate Vernon Smith provides the first of these overviews followed by overviews from Douglas Bernheim, Antonio Damasio, Wolfram Schultz and Randy Gallistel with a conclusion by Nobel laureate Daniel Kahneman. The book provides a historically rich exposition in each of its chapters and places a strong emphasis on describing both the accomplishments and controversies in the field. A clear explanatory style characterizes all chapters which seek to make core issues in economics, psychology and neuroscience accessible to scholars from all disciples. This volume will be essential reading for anyone interested in Neuroeconomics in particular or Decision-Making in general.

Ultimatum, Serotonin and Fairness

A new study links serotonin levels to Ultimatum decision: less serotonin is correlated with a higher rejection of unfair offers, suggesting that it "plays a critical role in regulating emotion during social decision-making"

[From ScienceNOW]

Deal or No Deal?

By Constance Holden
ScienceNOW Daily News
05 June 2008

What if your friend had a large apple pie but gave you only a sliver? Would you throw the piece on the floor in protest? Maybe, depending on your brain chemistry. New research suggests that such emotional decisions can be influenced by a shortage of the neurotransmitter serotonin.

Researchers have linked low levels of serotonin in the brain to various mental states, including depression and impulsive, irrational behavior. A team headed by neuroscience Ph.D. student Molly Crockett of the University of Cambridge in the U.K. wondered whether the neurotransmitter would affect how people play the ultimatum game, an experiment used by economists that shows how people's economic decisions are sometimes irrational.

In the game, a "proposer" is given a sum of money, part of which he or she offers to share with a "responder." If a responder turns down the offer as too low, then neither player gets any money. What the ultimatum game reveals is that even though a responder would always gain by accepting the offered share, he will sometimes cut off his own nose to spite his face, as it were, punishing a proposer by rejecting an unfair offer.

In the current study, the researchers recruited 20 volunteers and asked them to fast the evening before the game. The next morning, some of the volunteers were given a drink chock-full of every amino acid the body needs to make protein, save tryptophan, an amino acid from which serotonin is manufactured. The result, says Crockett, is that the amino acids rush to the brain, "crowding out" any residual tryptophan and creating a temporary shortage of tryptophan and therefore serotonin. Control subjects were given drinks that contained tryptophan.

Both groups then played the ultimatum game as responders. The lack of tryptophan did not affect the subjects' general moods or their perceptions of the fairness of an offer, the team reports online today in Science. It did, however, appear to make people more likely to reject unfair offers. For example, when they knew that they were being offered only 20% of the pot, 82% of the acute tryptophan depletion group rejected the offer over multiple trials, whereas only 67% of the placebo group did.

The research bolsters the view that rejection of an unfair offer is "an emotionally driven impulse," says Crockett. To heed more rational monetary considerations in the face of an unfair offer, she says, requires that you "swallow your pride"--or the sliver of pie--which is a form of emotional control.

The new work is "a significant advance" in understanding the neural mechanisms of how emotions impact decision-making, says neuroscientist Michael Koenigs of the National Institute of Neurological Disorders and Stroke in Bethesda, Maryland. Psychologist Ernst Fehr of the University of Zürich, Switzerland, cautions, however, that the paper doesn't really address which behavior is rational or irrational. Rejecting low offers, he says, could be the result of a rational calculation about the value of fairness rather than an angry impulse.

Two new books on neuroeconomics:

The Brainethics blogs discusses Two new books on neuroeconomics:

Peter Politser’s “Neuroeconomics” and Michael Shermer’s “The mind of the market“.

[You can find an excerpt of Shermer's book here]

a trader's morning testosterone level predicts his day's profitability

according to a new study plublished this week in PNAS:


J. M. Coates and J. Herbert

Endogenous steroids and financial risk taking on a London trading floor
http://dx.doi.org/10.1073/pnas.0704025105

Little is known about the role of the endocrine system in financial risk taking. Here, we report the findings of a study in which we sampled, under real working conditions, endogenous steroids from a group of male traders in the City of London. We found that a trader's morning testosterone level predicts his day's profitability. We also found that a trader's cortisol rises with both the variance of his trading results and the volatility of the market. Our results suggest that higher testosterone may contribute to economic return, whereas cortisol is increased by risk. Our results point to a further possibility: testosterone and cortisol are known to have cognitive and behavioral effects, so if the acutely elevated steroids we observed were to persist or increase as volatility rises, they may shift risk preferences and even affect a trader's ability to engage in rational choice.

See a good summary in Science.

Utilitarianism and the Brain

an interesting debate about the interpretation of neuroscientific results: (from the X-Phi Blog):

Guy Kahane and Nicholas Shackel have a new paper out in Nature that criticizes recent neuroscientific work on moral judgment and utilitarian bias.  One of their stalking horses is a paper by Koenigs et al. that also appeared recently in Nature.  The original Koenigs et al. paper can be found here and their reply to the Kahane and Shackel piece can be found here. 

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Nature Neuroscience Special Issue about Decision Neuroscience

The last issue of Nature Neuroscience features 4 great papers on the neuroscience of decision-making:

• Choice, uncertainty and value in prefrontal and cingulate cortex
  Matthew F S Rushworth and Timothy E J Behrens
• Risky business: the neuroeconomics of decision making under uncertainty
  Michael L Platt and Scott A Huettel
• Game theory and neural basis of social decision making
  Daeyeol Lee
• Modulators of decision making
  Kenji Doya

Enjoy!

The bounded rationality of self-control

Rogue traders such as Jérôme Kerviel or Nick Leeson engage in criminal, fraudulent and high-risk financial activities that often result in huge losses ($7 billion for Kerviel) or financial catastrophe (the bankruptcy of the 233 years-old bank who employed Leeson). Why would anyone do that?

A popular answer is that money is like a drug, and that Kerviel had behaved "like a financial drug addict" . And truly, it is. We crave money and feel its rewarding properties when our subcortical areas light up as if we were having sex or eating Port-Royal Cupcakes (just reading the list of ingredients of the latter is enough for me!). Money hits our sweet spot, and elicits activity in emotional and emotion-related areas. Thus rogue traders are like cocaine addicts, unable to stop the never-ending search for the ultimate buzz.

This is fine, but incomplete and partly misleading. We all have temptations, drives, desires, emotions, addictions, etc., and some of us experience them more vividly. The interesting question is not how intense the money thrill is, but how weak is self-control can be. By “self-control”, I mean the vetoing capacity we have: when we resist eating fat food, smoking (oh, just one, I swear) another cigarette, insulting that person that laugh at us, flirting with that cute colleague of yours, etc. Living in society requires that we regulate our behavior and—more often than not—doing what we should do instead of what we want to do. It seems that rogue traders, like addicts and criminals, lacks a certain capacity to implement self-control and normative regulation.

Traditional accounts of self-control construe this capacity as a cognitive, rational faculty. New developments in psychology suggest that it is more like a muscle than a cognitive process. If self-control is a cognitive process, activating it should speed up further self-control since it becomes highly accessible; priming, for instance, speeds up recognition. To the contrary, if self-control is a limited resource, using it should impair or slow down further self-control (since part of the resource will be spent the first time). Many experiments support the second options: self-control and inhibitory control are limited resources, a phenomenon Roy Baumeister and his colleagues called ego depletion: the

temporary reduction in the self's capacity or willingness to engage in volitional action (including controlling the environment, controlling the self, making choices, and initiating action) caused by prior exercise of volition. (Baumeister et al., 1998, p. 1253)

For instance, subjects who have to suppress their emotions while watching an upsetting movie perform worse on the Stroop task (Inzlicht & Gutsell, 2007). EEG indicates less activity in the ACC in subjects who had to inhibit their affective reactions. Subjects who had to reluctantly eat radishes abandon problem-solving earlier than subject who had chocolate willingly. Taking responsibility for and producing voluntarily a counterattitudinal speech (a speech that expresses an opinion contrary to its locutor’s) also reduced perseverance; producing the speech without taking responsibility did not) (Baumeister et al., 1998).

Self-control literally requires energy. Subjects asked to suppress facial reactions (e.g. smiles) when watching a movie have lower blood glucose levels, suggesting higher energy consumption. Control subjects (free to react how they want) had the same blood glucose levels before and after the movie, and performed better than control subjects on a Stroop Task. Restoring glucose levels with a sugar-sweetened lemonade (instead of artificially-sweetened beverages, without glucose) also increases performance. Self-control failures happen more often in situation where blood glucose levels is low. In a literature review, Gailliot et al show that lack of cognitive, behavioral and emotional control is systematically associated with hypoglycemia or hypoglycemic individuals. Thought suppression, emotional inhibition, attention control, and refraining from criminal behavior are impaired in individual with low-level blood glucose (Gailliot & Baumeister, 2007).

The bottom line is: self-control takes energy and is a limited resource; immoral actions happen not only because people are emotionally driven toward certain rewards, but because, for one reason or another, their “mental brakes” cannot stop their drives. Knowing that, as rational agents, we should allocate wisely our self-control resources: for example, by not putting ourselves in situations where we will have to spend our self-control without a good (in a utility-maximizing or moral sense) return on investment.


References

• Baumeister, R. F., Bratslavsky, E., Muraven, M., & Tice, D. M. (1998). Ego Depletion: Is the Active Self a Limited Resource? Journal of Personality and Social Psychology, 74(5), 1252-1265.
• Gailliot, M. T., & Baumeister, R. F. (2007). The Physiology of Willpower: Linking Blood Glucose to Self-Control. Personality and Social Psychology Review, 11(4), 303-327.
• Harris, S., Sheth, S. A., & Cohen, M. S. (2007). Functional Neuroimaging of Belief, Disbelief, and Uncertainty. Annals of Neurology, 9999(9999), NA.
• Houde, O., & Tzourio-Mazoyer, N. (2003). Neural Foundations of Logical and Mathematical Cognition. Nature Reviews Neuroscience, 4(6), 507-514.
• Inzlicht, M., & Gutsell, J. N. (2007). Running on Empty: Neural Signals for Self-Control Failure. Psychological Science, 18(11), 933-937.
• Pessoa, L. (2008). On the Relationship between Emotion and Cognition. Nat Rev Neurosci, 9(2), 148-158.

Coke, Pepsi, and The Brain--redux

In 2004, a team of neuroscientist conducted a new version of the Pepsi Challenge. Not only did participants had to indicate which cola they prefer, but they had to do this while their brain was scanned. Results showed that when subjects tasted samples of Pepsi and Coke with and without the brand’s label, they reported different preferences (McClure et al., 2004). Without labels, subjects evaluate both drinks similarly. When drinks were labeled, subjects report a stronger preference for Coke, and this effect was correlated with a stronger activity in the medial prefrontal cortex. This was due, according to the researchers (and many neuromarketers) to the effectiveness of Coke’s branding strategies. Somehow, Coke managed to trigger certains associations in our brain, and simply seeing their logo is enough to make a drink taste better. A similar effect was observed with costly wine bottles. Non-experts feels that the same bottle of wine with an expensive price tag is more appreciated than with a cheap one, and the expensive one elicit stronger activity in orbitofrontal cortex (Plassmann et al, 2008). Again, an area important in emotional processing.

A new study (Koenigs & Tranel, 2008) showed that some people are less sensitive to this branding effect: subjects with ventromedial prefrontal cortex damage (an area involved in emotional processing). Unlike their normal counterpart, these patients maintained their preference for Pepsi. Thus, as the authors conclude “[l]acking the normal affective processing, VMPC patients may base their brand preference primarily on their taste preference.” The VMPC thus act as a gate that let emotional memories affect present evaluations.

• Koenigs, M., Tranel, D. (2007). Prefrontal cortex damage abolishes brand-cued changes in cola preference. Social Cognitive and Affective Neuroscience, 3(1), 1-6. DOI: 10.1093/scan/nsm032
• McClure, S. M., Li, J., Tomlin, D., Cypert, K. S., Montague, L. M., & Montague, P. R. (2004). Neural Correlates of Behavioral Preference for Culturally Familiar Drinks. Neuron, 44(2), 379-387.
  
• Plassmann, H., O'Doherty, J., Shiv, B., Rangel, A. (2008). Marketing actions can modulate neural representations of experienced pleasantness. Proceedings of the National Academy of Sciences, 105(3), 1050-1054. DOI: 10.1073/pnas.0706929105

The Neuroeconomics of Social Norms: A Neo-Rationalist Account

A project I am working on, and my first Latex document (see here for more details on Latex):
If you cannot see the file here, download it there.

How to Play the Ultimatum Game? An Engineering Approach to Metanormativity

A paper I wrote with Paul Thagard has been accepted for publication in Philosophical Psychology:

• Hardy-Vallée, B., & Thagard, P. (forthcoming). How to Play the Ultimatum Game? An Engineering Approach to Metanormativity. Philosophical Psychology.

Abstract. The ultimatum game is a simple bargaining situation where the behavior of people frequently contradicts classical game theory. Thus, the commonly observed behavior should beconsidered irrational. We argue that this putative irrationality stems from a wrong conception of metanormativity (the study of norms about the establishment of norms). After discussing different metanormative conceptions, we defend a Quinean, naturalistic approach to the evaluation of norms. After reviewing empirical literature on the ultimatum game, we argue that the common behavior in the ultimatum game is rational and justified. We therefore suggest that the norms of economic rationality should be amended.

High price makes wine taste better

We already know that Pepsi labels make Pepsi taste better; now it seems that costly wine bottles their content taste better....

Rangel used functional magnetic resonance imaging to observe the brains of 20 people as they were given the same Cabernet Sauvignon and told it cost anything from £2.50 to £45 a bottle. The subjects were asked to describe how pleasurable the wine was to drink, and most described the “higher-priced” wine as much more enjoyable.

The researchers observed changes in a part of the brain known as the medial orbito-frontal cortex, which plays a central role in many types of pleasure. They found that the cortex became more activated by the “expensive” wines than by the cheaper ones. This, said Rangel, showed that the increase in pleasure was real, even though the products were identical.

Two New Papers on Natural Rationality

Hardy-Vallée, B. (forthcoming). Decision-Making in the Economy of Nature: Information as Value. In G. Terzis & R. Arp (Eds.), Information and Living Systems: Essays in Philosophy of Biology. Cambridge, MA: MIT Press.

This chapter analyzes and discusses one of the most important uses of information in the biological world: decision-making. I will first present a fundamental principle introduced by Darwin, the idea of an “economy of nature,” by which decision-making can be understood. Following this principle, I then argue that biological decision-making should be construed as goal-oriented, value-based information processing. I propose a value-based account of neural information, where information is primarily economic and relative to goal achievement. If living beings (I focus here on animals) are biological decision-makers, we may expect that their behavior would be coherent with the pursuit of certain goals (either ultimate or instrumental) and that their behavioral control mechanisms would be endowed with goal-directed and valuation mechanisms. These expectations, I argue, are supported by behavioral ecology and decision neuroscience. Together, they provide a rich, biological account of decision-making that should be integrated in a wider concept of ‘natural rationality’.

Hardy-Vallee B. (submitted) Natural Rationality and the Psychology of Decision: Beyond bounded and ecological rationality

Decision-making is usually a secondary topic in psychology, relegated to the last chapters of textbooks. It pictures decision-making mostly as a deliberative task and rationality as a matter of idealization. This conception also suggests that psychology should either document human failures to comply with rational-choice standards (bounded rationality) or detail how mental mechanisms are ecologically rational (ecological rationality). This conception, I argue, runs into many problems: descriptive (section 2), conceptual (section 3) and normative (section 4). I suggest that psychology and philosophy need another—wider—conception of rationality, that goes beyond bounded and ecological rationality (section 5).

Neuroeconomics and neuroepistemology: 2 new papers

Two papers you don't want to miss:

1. A study on the neural basis of believing (in the philosopher's sense of believing that P), suggest that truth (or taking something for true) is positively valued, while falsity is not (it activates the insula). as usual, to be interpreted carefully !

Harris, S., Sheth, S. A., & Cohen, M. S. (2007). Functional Neuroimaging of Belief, Disbelief, and Uncertainty. Annals of Neurology.

2. A neuroeconomics paper on trust: Krueger et al suggest that "Conditional trust selectively activated the ventral tegmental area, a region linked to the evaluation of expected and realized reward, whereas unconditional trust selectively activated the septal area, a region linked to social attachment behavior"

Krueger, F., McCabe, K., Moll, J., Kriegeskorte, N., Zahn, R., Strenziok, M., et al. (2007). Neural correlates of trust. Proceedings of the National Academy of Sciences, 104(50), 20084-20089.

Full reference

If by any chance you want to cite this paper, here is the full bibliographic record (meaning it's finally published!!):

Hardy-Vallee, B. (2007). Decision-Making: A Neuroeconomic Perspective. Philosophy Compass, 2(6), 939-953. http://dx.doi.org/10.1111/j.1747-9991.2007.00099.x

Values and regrets

Regret, from a decision-making point of view, is a countefactual post-hoc valuation of a decision. Regret and rejoicing are two varieties of remembered utility. Without a doubt, neuroeconomics can be informative about the neural mechanisms of regrets. As I once argued, however, we need a neuroeconomic account of valuation with clear distinction between differnt processes, mechanisms and functions, and between the different contributions of neural structures. A nice example:

In this paper:

• Chandrasekhar, P. V. S., Capra, C. M., Moore, S., Noussair, C., & Berns, G. S. (2007). Neurobiological regret and rejoice functions for aversive outcomes. Neuroimage.

it is said that "a cortical network, consisting of the medial orbitofrontal cortex, left superior frontal cortex, right angular gyrus, and left thalamus, correlates with the degree of regret. A different network, including the rostral anterior cingulate, left hippocampus, left ventral striatum, and brain stem/midbrain correlated with rejoice."

But, in another paper, regret, or its computational cousin "fictive learning signals", is now an outcome of midbrain dopaminergic systems:

• Lohrenz, T., McCabe, K., Camerer, C. F., & Montague, P. R. (2007). Neural signature of fictive learning signals in a sequential investment task. Proceedings of the National Academy of Sciences, 104(22), 9493-9498.

How to fit it all together? I am not sure yet but here are 2 possibilities:

1-a "same-level" explanation: dopaminergic systems and cortical networks contribute together to the feeling, emotions, and processing of regret/rejoicing. They are two faces of the same coin.

2-a "different-level" explanation: dopaminergic systems and cortical networks are two layers in a hierarchical multi-level architecture (that may have other level, e.g. molecular, etc.).

suggestions, ideas?

New paper in neuroeconomics

On the subjective value of delayed monetary rewards:

Neuroimaging studies of decision-making have generally related neural activity to objective measures (such as reward magnitude, probability or delay), despite choice preferences being subjective. However, economic theories posit that decision-makers behave as though different options have different subjective values. Here we use functional magnetic resonance imaging to show that neural activity in several brain regions—particularly the ventral striatum, medial prefrontal cortex and posterior cingulate cortex—tracks the revealed subjective value of delayed monetary rewards. This similarity provides unambiguous evidence that the subjective value of potential rewards is explicitly represented in the human brain

Kable, J. W., & Glimcher, P. W. (2007). The neural correlates of subjective value during intertemporal choice. Nat Neurosci, 10(12), 1625-1633. http://dx.doi.org/10.1038/nn2007

Turkey, cooperation and serotonin

Tryptophan is a chemical precursor to serotonin that can be found in turkey. A recent study suggest that it could reduce cooperation in prisoner's dilemma:

half of the volunteers were given a drink that depleted their tryptophan levels prior to the start of the game, thereby decreasing serotonin levels in their brain. Rogers and his team found that dampening serotonin activity significantly decreased the level of cooperation among the players, and that this group also rated fellow players as less trustworthy. "The findings suggest that a serotonin deficit might impair sustained cooperation," says Rogers.[technologyreview]

Neuroeconomics in New-York

NYU will host a symposium on Neuroeconomics and Decision-Making in January (11-13). It is an amazing panel of speakers:

Douglas Bernheim, Antonio Damasio, Randy Gallistel, Wolfram Schultz, Vernon Smith

Bernard Balleine, Peter Bossaerts, Sarah F. Brosnan, Colin Camerer, Andrew Caplin, Kenji Doya, Paul W. Glimcher, Ernst Fehr, Michael Dorris, William T. Harbaugh, Brian Knutson, David Laibson, Daeyeol Lee, Kevin McCabe, Read Montague, Elizabeth Phelps, Michael Platt, Russell A. Poldrack, Antonio Rangel, Aldo Rustichini, Laurie Santos, Joan B. Silk, Julia Trommershäuser, Elke U. Weber ALL IN THE SAME PLACE !!!

Decision-Making in Robotics and Psychology: A Distributed Account

Forthcoming a special issue of New Ideas in Psychology on Cognitive Robotics & Theoretical Psychology, edited by Tom Ziemke & Mark Bickhard:

Hardy-Vallée, B. (in press). Decision-Making in Robotics and Psychology: A Distributed Account. New Ideas in Psychology

Decision-making is usually a secondary topic in psychology, relegated to the last chapters of textbooks. The psychological study of decision-making assumes a certain conception of its nature and mechanisms that has been shown wrong by research in robotics. Robotics indicates that decision-making is not—or at least not only—an intellectual task, but also a process of dynamic behavioral control, mediated by embodied and situated sensorimotor interaction. The implications of this conception for psychology are discussed.
[PDF]

Economic neuroendocrinology : 2 new studies

Two interesting papers in press in NeuroEndocrinology Letters:

1. Smokers are fairer in the Ultimatum Game when they have to split cigarettes than when they split money:

• Takahashi, T. (2007). Economic decision-making in the ultimatum game by smokers. Neuro Endocrinol Lett, 28(5). [pubmed]

2. Social evaluation significantly increases generosity in the dictator game:

Takahashi, T., Ikeda, K., & Hasegawa, T. (2007). Social evaluation-induced amylase elevation and economic decision-making in the dictator game in humans. Neuro Endocrinol Lett, 28(5).[pubmed]