Neuroeconomics in the Annual Review of Psychology

A great team of (neuro) economists/psychologists, George Loewenstein, Scott Rick and Jonathan Cohen, wrote an extensive review paper about neuroeconomics for the 2008 Annual Review of Psychology. It presents all important research papers, discusses how neuroeconomics shed light--from a psychological and economic point of view--on decision-making under risk and uncertainty, intertemporal choice, and social decision making and, finally, show how this research can contribute to psychology. It is a highly recommended paper. One important missing topic, however, is all the neuroeconomics literature about hormomes and behavior, such as Paul Zak's lab research, for instance, the study that shows that oxytocin increases trust (and generosity; see this post): players transfer more money, in the trust game, after inhaling oxytocin (an hormone involved in social cognition, fear reduction, bonding, love, etc.). Anyway, here is a short summary (from the paper):

Neuroeconomics has further bridged the once disparate fields of economics and psychology, largely due to movement within economics. Change has occurred within economics because the most important findings in neuroeconomics have posed a challenge to the standard economic perspective.

Neuroeconomics has primarily challenged the standard economic assumption that decision making is a unitary process—a simple matter of integrated and coherent utility maximization—suggesting instead that it is driven by the interaction between automatic and controlled processes.

Neuroeconomic research has focused most intensely on decision making under risk and uncertainty, but this line of research provides only mixed support for a dual systems perspective.

The extent to which intertemporal choice is generated by multiple systems with conflicting priorities is perhaps the most hotly debated issue within neuroeconomics. However, a majority of the evidence favors a multiple systems perspective.

Neuroeconomic research on social preferences is highly supportive of a dual systems account, although the most prominent studies come to conflicting conclusions regarding how selfinterest and fairness concerns interact to influence behavior.

Neuroeconomics may ultimately influence psychology indirectly, via its influence on economics (e.g., by inspiring economic models increasingly grounded in psychological reality), and directly, by addressing debates of interest within psychology (e.g., whether multiple systems operate sequentially or in parallel to influence behavior).

References

• Loewenstein, G., Rick, S., & Cohen, J. (2008). Neuroeconomics. Annual Review of Psychology, 59(1). (published online as a Review in Advance on September 17, 2007)

A basic mode of behavior: a review of reinforcement learning, from a computational and biological point of view.

The Journal Frontiers of Interdisciplinary Research in the Life Sciences (HFSP Publishing) made its first issue freely available online. The Journal specializes in "innovative interdisciplinary research at the interface between biology and the physical sciences." An excellent paper (complete, clear, exhaustive) by Kenji Doya presents a state-of-the-art review of reinforcement learning, both as a computational theory (the procedures) and a biological mechanism (neural activity). Exactly what the title announces: Reinforcement learning: Computational theory and biological mechanisms. The paper covers research in neuroscience, AI, computer science, robotics, neuroeconomics, psychology. See this nice schema of reinforcement learning in the brain:

(From the paper:) A schematic model of implementation of reinforcement learning in the cortico-basal ganglia circuit (Doya, 1999, 2000). Based on the state representation in the cortex, the striatum learns state and action value functions. The state value coding striatal neurons project to dopamine neurons, which sends the TD signal back to the striatum. The outputs of action value coding striatal neurons channel through the pallidum and the thalamus, where stochastic action selection may be realized

This stuff is exactly what a theory of natural rationality (and economics tout court): plausible, tractable, and real computational mechanism grounded in neurobiology. As Selten once said, speaking of reinforcement learning:

a theory of bounded rationality cannot avoid this basic mode of behavior (Selten, 2001, p. 16)

References

• Kenji, D. (2007). Reinforcement learning: Computational theory and biological mechanisms. HFSP Journal, 1(1), 30-40.
• Selten, R. (2001). What is bounded rationality ? . In G. Gigerenzer & R. Selten (Eds.), Bounded Rationality: The Adaptive Toolbox (pp. 13-36). MIT Press: Cambridge, MA.
  

The Top 10 Most Important Papers in Neuroeconomics

The choice wasn't easy, and I may be influenced by my research interests, but here is what I think are the most important papers in the field:

• Camerer, C., Loewenstein, G., & Prelec, D. (2005). Neuroeconomics: How neuroscience can inform economics. Journal of Economic Literature, 43(1), 9-64.

Written by famous behavioral economists, this extensive review paper suggests how economics can be theoretically and empirically informed by neuroeconomics.

• Glimcher, P. W., & Rustichini, A. (2004). Neuroeconomics: The Consilience of Brain and Decision. Science, 306(5695), 447-452.

An analysis of the theoretical relationship between biology, economics, neuroscience and psychology.

• Sanfey, A. G., Rilling, J. K., Aronson, J. A., Nystrom, L. E., & Cohen, J. D. (2003). The neural basis of economic decision-making in the Ultimatum Game. Science, 300(5626), 1755-1758.

Famous paper showing that unfair offers elicit activity in the anterior insula, an area associated with disgust (but not when they interact with a computer).

• Zak, P. J. (2004). Neuroeconomics. Philos Trans R Soc Lond B Biol Sci, 359(1451), 1737-1748.

A review paper that provides a complete introduction to neuroscience (methods, brain functions, etc.) and neuroeconomics.

• Kosfeld, M., Heinrichs, M., Zak, P. J., Fischbacher, U., & Fehr, E. (2005). Oxytocin increases trust in humans. Nature, 435(7042), 673-676.

Subjects who received oxytocin via nasal spray are more trusting.

• Rilling, J., Gutman, D., Zeh, T., Pagnoni, G., Berns, G., & Kilts, C. (2002). A neural basis for social cooperation. Neuron, 35(2), 395-405.

Players who initiate and players who experiment mutual cooperation display activation in nucleus accumbens and other reward-related areas.

• de Quervain, D. J., Fischbacher, U., Treyer, V., Schellhammer, M., Schnyder, U., Buck, A., et al. (2004). The neural basis of altruistic punishment. Science, 305(5688), 1254-1258.

Punishing cheaters, in the trust game, activates the nucleus accumbens, a subcortical structure involved in pleasure.

• Montague, P. R., & Berns, G. S. (2002). Neural Economics and the Biological Substrates of Valuation. Neuron, 36(2), 265-284.

One of the first application of utility theory to dopaminergic systems.

• McCabe, K., Houser, D., Ryan, L., Smith, V., & Trouard, T. (2001). A functional imaging study of cooperation in two-person reciprocal exchange. PNAS, 98(20), 11832-11835.

The first imaging study in game theory. Decision-makers are more likely to cooperate with real humans than with computers and cooperators have a significantly different brain activation in the two conditions.

• Platt, M. L., & Glimcher, P. W. (1999). Neural correlates of decision variables in parietal cortex. Nature, 400(6741), 238.

The first genuine neuroeconomics paper. Lateral intraparietal area (LIP) activity predicts visual-saccadic decision-making, encode the desirabilities of making particular movements.

My critera are citations, influence, historical/theoretical importance and relevance for understanding decision-making

Decision-Making: A Neuroeconomic Perspective

I put a new paper on my homepage :

Decision-Making: A Neuroeconomic Perspective

Here is the abstract:

This article introduces and discusses from a philosophical point of view the nascent field of neuroeconomics, which is the study of neural mechanisms involved in decision-making and their economic significance. Following a survey of the ways in which decision-making is usually construed in philosophy, economics and psychology, I review many important findings in neuroeconomics to show that they suggest a revised picture of decision-making and ourselves as choosing agents. Finally, I outline a neuroeconomic account of irrationality.

Hardy-Vallée, B. (forthcoming). Decision-making: a neuroeconomic perspective. Philosophy Compass. [PDF]

This paper is the first in my philosophical exploration of neuroeconomics, and I would gladly welcome your comments and suggestions for subsequent research. Email me at benoithv@gmail.com.

Must-read reviews

The 2007 edition of the Annual Review of Neuroscience (vol. 30, 2007) is online since today. 

Although I did not read them yet, anybody interested in decision-making, neuroeconomics or anything this blog discusses should read this two papers:

• Wallis, J. D. (2007). Orbitofrontal Cortex and Its Contribution to Decision-Making. Annual Review of Neuroscience, 30(1), 31-56.
• Gold, J. I., & Shadlen, M. N. (2007). The Neural Basis of Decision Making. Annual Review of Neuroscience, 30(1), 535-574.

(I like explicit titles such as these! )

The Annual Reviews is a series of  "authoritative, analytic reviews in 33 focused disciplines within the Biomedical, Physical, and Social Science" (from the publisher's website). The state-of-the art in any of these. Enjoy !