How neuroeconomics can lead to mechanistic explanations

1. Utility and neuroscience:
a mechanistic approach of decision-making and
rationality
Benoit Hardy-Vallée
Department of Philosophy
University of Waterloo

2. Neuroeconomics:
Definition
Methods
Results
Discussions

3. Definitions
• “an emerging transdisciplinary field that uses
neuroscientific measurement techniques to identify
the neural substrates associated with
economic decisions” (Zak, 2004, p. 1737)
• “the program for understanding the neural basis of
the behavioral response to scarcity”. (Ross
2005, p. 330)
• “to understand the processes that connect sensation and
action by revealing the neurobiological
mechanisms by which decisions are made". (Glimcher
& Rustichini, 2004, p. 447)

4. in a nutshell...
The study of the neural mechanisms of decision-
making and their economic significance

5. Psychology
Economic
Psychology
Neuropsychology
Neuroeconomics
Economics Neuroscience
Computational
Neuroscience
Bioeconomics
Neuroethology
Behavioral
Ecology

6. 1881 1926 1952 1994 2003
Ramsey’s Hayek Damasio Glimcher
Edgeworth’s
psychogalvanometer The Sensory Order Descartes’ Error Decisions, uncertainty,
hedonimeter
and the brain

7. Damasio: emotional rationality
orbitofrontal
cortex
Dolan, R. J. (2002). Emotion, cognition, and behavior. Science, 298(5596), 1191-1194.

8. Neuroeconomic Method
model of a decision task
Behavioral test
Comparison theory/data Mechanisms
Neural studies
Single-cell recording, Imaging, Hyperscanning, Lesion studies, Neuropsychological
patients, Animal models, Computational models

9. a few examples...

10. neuro-shopping
Knutson, B., Rick, S., Wimmer, G. E., Prelec, D., & Loewenstein, G. (2007). Neural predictors of purchases. Neuron, 53(1), 147-156.

11. Product Price Choice
“mmm... the price is right
Chocolate
BUY
anterior insula < Medial Prefrontal Cortex
the price is not right
Nucleus
DON’T
anterior insula > Medial Prefrontal Cortex
Accumbens

12. Risk vs. ambiguity
greater activation in response to risk than in response to ambiguity.
reward
computation
greater activation in response to ambiguity than in response to risk.
fear/vigileance “Affective forecasting”
Hsu, M., Bhatt, M., Adolphs, R., Tranel, D., & Camerer, C. F. (2005). Neural systems responding to degrees of uncertainty in human decision-making. Science, 310(5754), 1680-1683.

13. Ultimatum Game
Proposer
$9/$1 $8/$2.... ... ...$1/$9
Responder Accept/reject

14. ‘unfair’ offers trigger moral disgust and cognitive conflict

15. the ‘warm glow’ of cooperation

16. Trust Game
1.
x$
3x$
A. B.
x$ x 3=
(Y$) (Y$)
A.
2. B.
(Y-x $) (Y + 3x$)
 Z$
3. A. B.
(Y-x)+Z $) (Y + 3x) –Z $)

17. the ‘sweet taste’ of revenge:
Punishment is predicted by activity in the striatum

18. Cold machines?
Humans do not cooperate with
computers
Human and computer partners do not
elicit the same neural-affective reactions

19. the mechanisms of
decision-making

20. Nomological-Deductive Model
explanation prediction
Universal Law or
Nash Equilibrium
lawlike principle
Conditions Prisoner’ Dilemma
Phenomenon Mutual Defection

21. Mechanistic
model
“A mechanism is a structure performing a function in virtue of
its component parts, component operations, and their
organization. The orchestrated functioning of the
mechanism is responsible for one or more phenomena”
Bechtel, W., & Abrahamsen, A. (2005). Explanation: A mechanist alternative. Studies in History and Philosophy of Science, C:, 36(2), 421-441.

22. ex: memory
mechanisms
Craver, C. F. (2002). Interlevel experiments and multilevel mechanisms in the neuroscience of memory. Philosophy of Science, 69, S83–S97.

23. Trust:
Culture, norms, institutions
Trust behavior
Cognitive heuristics
Neural basis
Molecular interactions

24. advantages of mechanistic models:
causal entities
‘carve nature at its joints’
better integration with other domains
can be simulated by computational neuroscience
(partly) immune against pessimism (bounded
rationality) and optimism (ecological rationality)
“Inferring preferences from a choice does not tell us everything
we need to know”(Camerer et al., 2004, p. 563).
Camerer, C. F., Loewenstein, G., & Prelec, D. (2004). Neuroeconomics: Why economics needs brains. Scandinavian Journal of Economics, 106(3), 555-579.

25. Rationality?

26. maximizing utility as “emotional management”

27. [Regret forecasting]
Counterfactual
Utility
[regrets]
[Affective forecasting]
[Regret /rejoicing]
Predicted
Utility
Remembered
Experienced
Utility
Utility
[prediction error]
Decision [Hedonic affect]
Utility
[Valuation]
27

28. Irrationality?

29. Miswanting: misevaluating future experienced. utility
Misprediction of regret
‘irrational pursuit’: Decision utility > Predicted Utility

30. Thanks !
benoithv@gmail.com
http://decisis.net
Natural Rationality Blog:
http://naturalrationality.blogspot.com