Neuroeconomics is exciting, and scary

Great article from Shiller on neuroeconomics.  The more justification, and more positive side, of neuroeconomics is mentioned here:

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.

This is cool.  Economists want to be reductionist, but we were unable to boil down our theory quite far enough and had to settle on some underlying assumptions of human nature – assumption that were based on “conducting experiments in our own heads”.  Neuroeconomics provides a route for us to actually push the ontological envelope and create a more objective, mechanistic, way to describe the underlying elements of human action.

However, the risk is that we allow this view to cloud our thinking on choice – no matter how far neuroeconomics evolves we will never clearly decipher whether actions are the result of determinism or free will.  By describing action in a deterministic way, we may treat human action as “too deterministic”, leading to a bias towards excessive control and meddling.

6 replies
  1. Talo
    Talo says:

    In what way does regular utility theory incorporate or allow for free will? I don’t really see how a neuroscience model of choice would be much different from a utility model in terms of how they treat freewill and determinism.

    • Matt Nolan
      Matt Nolan says:

      That is a good point, I’m glad you raised it – and I agree with you that digging further down into how choice functions does not change our view in terms of free will or determinism at all … in theory.

      However, I would say that the way economics discusses choice presupposes itself towards determinism – I’m not saying that you HAVE to assume determinism to use the framework, hell I believe in free will and I still find the framework extremely useful.

      However, given that predisposition, I believe that the more mechanically you describe choice, and the more you reduce it to clear elements, the more risk there is that people will apply it with the idea of determinism in their minds – and therefore the more “certainty” we have around choice, the more likely it is that people will set up policies based on a deterministic view of the world, stripping out responsibility and the importance of revealed preferences.

      Neuroscience still doesn’t give the ability to objectively compare pains and pleasures for the full relevant set of outcomes.  Without this we need to keep some idea of caution whenever we apply policies. 

      So my concern has nothing to do with what the discipline could do – but with how practicioners may view it.  I’d say that I took the other side of defending neuroscientists in this post:


      • LegendLength
        LegendLength says:

        The problem is it’s becoming quite clear in philosophy circles that free will is entirely incoherent.

        • Matt Nolan
          Matt Nolan says:


          When it comes to philosophy I’m a scrub for sure. I read the recent Nagel book where he discussed the mind – rejecting dualism and biological reductionism in favour of some for of creationist (though not necessarily religious) explanation of the link between the mind and body.

          My impression is that the biological reductionist position is close to the idea of determinism, while is is dualism that would more favour free will – although free will in that context can’t me “explained” and seems unscientific.

          I’m not convinced that just because we can’t explain something we can then just rule it out – especially since our argument regarding which is true relies on what can be very subtle definitions. After all, our choice may be determined by our preferences, the preferences of others, the external conditions, and the opportunity cost – but if we still actively make the choice we may still say we have free will.

          Furthermore, even if we don’t actively make the choice and it comes from rules that our unconscious mind works on, we may still have free will because we can over-ride this choice – however, this is unobservable because we never “over-ride” our best choice … and as a result, we cannot tell if our actions are free or pre-determined.

  2. ArmchairAnalyst
    ArmchairAnalyst says:

    A very interesting field but I tend to agree that insights from any findings to macro policy are probably limited and potentially could be hijacked by policy makers seeking justifications for their ideas. E.g. if research showed that decisions made by the brain between choices were based on some basic Darwinian imperitive, I still don’t think it would necessarily be right to use a Darwinian “social welfare function” to make decisions between who should get resources at the macro level. 
    As an aside, though, I’m sure Dr Bollard would be all it if he could simply flood the water supply with a drug to adjust brain chemistry to make people immediately “spend” or “save” more as appropriate!

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