Neuroeconomics

Image Source: Psychology Today.

A couple of years ago, I went to a conference where some new-fangled techniques in economic studies were discussed in one of the sessions. The novel methods involved presenting test subjects with economic choices, and then administering blood tests or brain scans to observe changes in hormonal levels and brain activity; it is an idea I touched on in an earlier post. At the time, I had a laugh; this bizarre hybrid of economics and psychobiology was chilling, yet funny, because of its dull literal-mindedness. 

When the economy tanks and everyone finds economists without answers, then economic analysts sometimes poach on other disciplines' territories to find new methods.  Occasionally, they move right into another field and make themselves at home. For example, they have been camping in the field of history, with an area of research they call Cliometrics.  They've also expressed some interest in economics as an applied philosophy. As one of my friends who works in philosophy said, if the economists were to stop by, he would go down to the front gate and say: "Nothing to see here, Boys, move on, move on."

And move on they have, with zero sense of irony - to neuroscience, psychology and biology. It's a sign of how desperate economic researchers are.  They need to find solutions to serious problems that their theories partly engendered. So far, they have come up empty-handed. Rather than containing the recession, their methods have been politicized; their ideas have been appropriated by practitioners in politics; and the economy is not improving. And so since 2008, with pressing urgency, the economists have been moving on, in a bid to develop whole new ways of economic thinking and remake the world economy.

In 2008, Psychology Today defined the new-fangled area of Neuroeconomics with typical interdisciplinary babble:

"Neuroeconomics is a recent consilient discipline (that is, a discipline that combines the principles of other disciplines to produce a comprehensive analysis) that measures brain activity while experimental subjects make decisions. Because the brains of all animals are "economic," that is, they have limited resources to achieve necessary goals, neuroeconomics experiments are not limited to studies of human beings, but have also employed apes, monkeys, and rodents. Economics is the study of constrained decision making, and it uses both mathematical and statistical models of the decision goals and outcomes without considering the mechanisms leading to decisions. Neuroscience has focused primarily on cataloging mechanisms without considering the purpose of decisions. For this reason, neuroeconomics is a natural combination that draws from the best of, and extends, both fields."

And now, a report this week in the Japan Times states that Neuroeconomics is on the verge of a revolution:

The neuroeconomic revolution has passed some key milestones quite recently, notably the publication last year of neuroscientist Paul Glimcher's book "Foundations of Neuroeconomic Analysis" — a pointed variation on the title of Paul Samuelson's 1947 classic work "Foundations of Economic Analysis," which helped to launch an earlier revolution in economic theory. And Glimcher himself now holds an appointment at New York University's economics department (he also works at NYU's Center for Neural Science).

To most economists, however, Glimcher might as well have come from outer space. After all, his doctorate is from the University of Pennsylvania School of Medicine's neuroscience department. Moreover, neuroeconomists like him conduct research that is well beyond their conventional colleagues' intellectual comfort zone, for they seek to advance some of the core concepts of economics by linking them to specific brain structures.

Much of modern economic and financial theory is based on the assumption that people are rational, and thus that they systematically maximize their own happiness, or as economists call it, their "utility." When Samuelson took on the subject in his 1947 book, he did not look into the brain, but relied instead on "revealed preference." People's objectives are revealed only by observing their economic activities. Under Samuelson's guidance, generations of economists have based their research not on any physical structure underlying thought and behavior, but only on the assumption of rationality.

As a result, Glimcher is skeptical of prevailing economic theory, and is seeking a physical basis for it in the brain. He wants to transform "soft" utility theory into "hard" utility theory by discovering the brain mechanisms that underlie it.

Yesterday, I wrote a post about how the economy might become disengaged from capital materialism and engaged instead to capital virtualism, with attendant new political synthetic ideologies. That virtual aspect rests on science and technology.

I have also written a post (here) on how economists occupy the role once played in ancient times by oracles; and I have another post (here) on how economists may soon be replaced by scientists and technologists in that role. Economists are pseudo-time-priests, who are meant to see bits of the future for us. Practically the whole stability of our geopolitical order depends upon their calculus and prognostications. When our oracles fail so spectacularly, it's hard not to wonder about who will supplant them. In Neuroeconomics, quantum psychotech and neuroscience might absorb economics, rather than the other way around.


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